Simon Read: 'Foreign exchange fraud and the precautions we must take'

As soon as you hand over your cash to an unregistered firm, it's at risk

Almost five years ago, I reported in some detail the collapse of a currency firm that went bust owing £20m to around 12,500 people. This week the people behind the firm were finally brought to justice, but the court case ended in tragedy after the man behind the scandal killed himself last Sunday while the jury was still deliberating its verdict.

Peter Benstead was the key figure in the Crown Currency foreign exchange fraud. The company encouraged people to sign up for currency with it months before they needed the money, by offering much better exchange rates than they could get elsewhere.

But the money was used to gamble on the markets, meaning the firm had to use new customers' cash to pay existing clients. That strategy came crashing to an end in October 2010, leaving thousands of innocent people out of pocket.

During the court case, jurors heard tales of lavish spending. It was revealed that Mr Benstead spent almost £1m on a luxury Penzance home just weeks before the collapse, which led to a charge of money laundering. He splashed out £84,000 on a motor home, more than £55,000 on two luxury cruises and treated his family to a new Ford Galaxy worth £33,945. The court was told that the struggling firm was still accepting payment from customers, even when some staff knew it was insolvent – with little chance of clients getting their money back.

Mr Benstead's lawyer claimed he was "honest but incompetent"; his suicide meant no judgment was passed. The jury did find his widow Susan guilty of one count of money laundering, relating to the Penzance house. Their son Julian, and son-in-law Roderick Schmidt, were also convicted of a range of offences, along with employees Stephen Matthews and Edward James.

It's a terrible end to a sordid story but, despite the tragic loss of life, our sympathies should remain with the victims left out of pocket by the fraud. There was no protection offered by the authorities as the company was not registered.

Most reputable foreign exchange firms are registered with the Financial Conduct Authority, which means that if they go bust, your money should be protected. But, astoundingly, it's not mandatory. In short, as soon as you hand over your hard-earned cash to an unregistered firm, it's at risk. Before risking your cash, check any firm is on the register by going online to fca.org.uk/firms/systems-reporting/register and putting the company's name to the test.