A NEWPORT man who ran a failed spread betting scheme has been given a lengthy bankruptcy restriction by the County Court at Cardiff.
Stuart Carl Mudge, 61, obtained more than £8.5 million from investors for his failed spread betting scheme - the Churchgate Trading Syndicate - between June 2009 and February 2012.
An investigation by a specialist team at the Insolvency Service found that investors were promised ‘guaranteed’ returns of 15 per cent every quarter and told their money would be used to trade spread bets.
The Financial Conduct Authority (FCA) obtained interim injunctions against Mr Mudge in February 2012, freezing his assets and preventing him from operating the syndicate.
In a settlement reached in September 2013, Mr Mudge acknowledged that by operating the syndicate without FCA authorisation, he broke the law.
The High Court subsequently ordered him to pay £7,010,000 to the FCA to distribute to the Syndicate’s investors.
Mr Mudge was made bankrupt after failing to pay any money to the FCA. Other sums recovered by the FCA funded a small pro-rata return to the investors; they have, nevertheless suffered substantial losses.
Following his bankruptcy on December 9 2014, the Official Receiver further investigated Mr Mudge’s conduct and on February 3 2017, the County Court at Cardiff made a bankruptcy restrictions order against him for 12 years.
Commenting on the bankruptcy restrictions order, Ken Beasley, Official Receiver at the Insolvency Service said: "This case is a prime example of the losses that can be incurred via an investment scheme that looks too good to be true.
"Investors lost over £7,000,000 and Mr Mudge will face severe financial restrictions lasting for 12 years.
"Bankruptcy restrictions orders and undertakings are central to protecting not only the bankruptcy process, but the people and organisations owed money who suffer financially from irresponsible or unscrupulous behaviour."
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Investors are often lured by false promises of high returns without the high risks being disclosed to them.
"Spread betting on securities or currencies is typically risky and investors in Mr Mudge’s scheme ended up losing substantial amounts of money. "We urge investors to be vigilant and wary of anyone promising high or guaranteed returns – these are often the hallmarks of a scam, even if the trader is someone you know.
"And check with the FCA Register to ensure the person is authorised to be advising or trading on behalf of customers”.
Mr Mudge’s period of bankruptcy restriction means that he cannot promote, manage, or be a director of a limited company until February 2029.
Further restrictions include that: • he must disclose his status as a person subject to bankruptcy restrictions to a credit provider if he wishes to get credit of £500 or more • he may not act as an insolvency practitioner, or as the receiver or manager of the property of a company Mr Mudge’s sanction follows investigation by the Official Receiver at Public Interest Unit (North), a specialist team of the Insolvency Service.
The Official Receiver’s investigation found that in addition to acting in breach of the Financial Services and Markets Act 2000, Mr Mudge effectively operated the trading syndicate as a scheme where capital and interest repaid to investors was paid out of the capital payments made by other investors.
This gave the impression that the trading syndicate was generating such returns through trading whereas it made significant losses though spread betting.