Last month the Financial Services Authority (FSA) made Darren Upton bankrupt at Leeds County Court after he failed to pay them funds intended for people who had invested in a scheme run by his firm, Upton & Co Accountants Ltd, based in Wakefield.
In June of this year the FSA served a statutory demand on Mr Upton seeking payment of £1,090,782, this being comprised of £1,220,782 owing to them less monthly instalments paid since March 2010.
Mr Upton devised and operated a collective investment scheme (CIS) known as the 'Currency Plan' which promised investors high rates of return and ostensibly had been aimed at investing in the foreign exchange markets.
A CIS is where a group of investors pool their funds, which are then invested in one or more asset classes by a fund manager, with a view to sharing their profits. Problem was that Mr Upton was not authorised by the FSA to carry out such business nor did he possess the necessary expertise.
Undeterred, he proceeded to relieve 390 investors of a total of more than £5 million and having done so carried out limited trading and returned very little money to investors.
Following an investigation by the FSA in February 2009, a High Court injunction froze the assets of Mr Upton's firm and it eventually agreed to pay £3.6 million plus a further £840,000 in 84 monthly instalments. In return the FSA agreed not to enforce an order for payment of £1,220,782, that being the remainder of the funds the firm had received from investors in the Currency Plan. The FSA only agreed to this because Upton & Co and Mr Upton did not have sufficient assets to meet a lump sum demand of £1,220,782 at the time and it was believed that, as a result, more funds could be returned to investors over time.
The monthly instalments of £10,000 were honoured until February 2011, when the money from Mr Upton and his firm dried up. At that point the FSA was no longer bound by the agreement and were free to seek recovery from both parties.
In July 2010, the High Court granted an order for £3.72 million to be distributed to investors with immediate effect, with a further distribution to be made by the earlier of two years' time or when the total funds held by the FSA exceed £250,000.
The unsuspecting victims of Mr Upton's scam have been fortunate in as much that they have been able to retrieve some of their original investment which is rare when money is misappropriated in this way as there is no protection offered by the Financial Services Compensation Scheme. Normally, any sum recovered amounts to a few pence in the pound but because the FSA intervened early in the Currency Plan's life cycle, they were able to recover a large proportion of the original amount invested.
£600,000 of investors’ money was however lost by Mr Upton in unprofitable exchange trading and a loss making offshore investment.
The Official Receiver should now be responsible for administering Mr Upton's affairs and dealing with his assets, as his trustee in bankruptcy. The FSA will update investors about the effect of Mr Upton being made bankrupt.
It is understood that Darren Upton has pleaded guilty to fraud and is awaiting sentencing.