Spanish police have arrested six men suspected of involvement in a fraud that cost investors in a London Stock Exchange (LSE)-listed company hundreds of millions of pounds.
The Spanish authorities, acting on a request from their British counterparts, detained the six men in Spain yesterday, following a three-year investigation into a huge alleged fraud at Langbar International.
"Search and arrest operations were undertaken... last week at four residences and two business premises in Madrid, Barcelona and Alicante," the Serious Fraud Office in the UK said.
An SFO spokesman added: "Six people were arrested and interviewed as part of the ongoing investigation into certain individuals previously associated with Crown Corporation Ltd (now Langbar International, under new management).
"The six people arrested were male with ages ranging from 56 to 76 years. They were Spanish nationals except one, an Argentinian national."
Neither the SFO nor the Spanish police would name those detained, though Spanish newspapers said one of the men was Abraham Arad Hochman, a former director of the company. Another one of the men arrested is understood to be a businessman prominent in Spanish banking circles.
The arrests yesterday follow a three-year investigation into Langbar, which collapsed in 2005 following a scandal that damaged the reputation of the Alternative Investment Market, the junior market on the LSE.
Langbar first floated on AIM in the autumn of 2003, claiming to have assets in excess of £200m. The company subsequently claimed to have acquired valuable interests in contracts with the Argentine government, and said it had funds of £360m held in the form of international credit certificates deposited in the Netherlands and Brazil.
Langbar's share price rose sharply, particularly after a series of advertisements were placed in specialist financial publications in the UK promoting the company. However, investigators believe these adverts were placed in a deliberate attempt to ramp up the value of Langbar by individuals who subsequently cashed in shares at the company at great personal gain.
Spanish police said the adverts were placed "with the sole aim of whipping up interest (and consequently an increase in value) in the company's shares".
Amid mounting suspicion about the company, shareholders eventually appointed Kroll Associates, the corporate investigations company, to find the cash and certificates Langbar claimed to have, but it was unable to do so. The shares were suspended from AIM in 2005 as regulators and legal authorities launched investigations into the affair.
While Nabarro Wells, the nominated adviser that floated the company, was fined £250,000 in 2007 by the London Stock Exchange for failings related to the affair, the perpetrators of the alleged fraud have never been brought to justice.
However, Mariusz Rybak, the founder of Langbar, agreed in April last year to pay the company £30m to settle a civil lawsuit.
Yesterday's arrests will delight shareholders who lost out following the collapse of Langbar, many of whom are now members of an active support group that continues to seek compensation for the losses incurred. However, while the arrests raise the possibility that a legal case will now proceed, there is no immediate prospect of any redress for the victims of the scandal.
Spanish police said they had made the arrests on the request of the British authorities, after the Serious Fraud Office issued an international appeal for help in tracking down the people and companies linked to the alleged fraud. "[The fraudsters] acted in a co-ordinated and calculated manner, profiteering from the good faith of buyers and investors, who were swindled to the tune of $450m (£316m)," Spanish police said. "Through complex commercial and stock market operations, and falsifications, [those behind the fraud] managed to increase the value of shares in a firm quoted on the stock market, without having deposits to back it up, and then profited from the subsequent sale of shares."
The SFO said those detained by the police included their chief suspects in the affair as well as four advisers who are suspected of falsifying documents that helped the scam to prosper. The six were freed last night while Spanish authorities wait for British judicial authorities to make the next move in the case.
The Financial Services Authority, the chief City regulator in the UK, yesterday declined to comment on the matter. City watchdogs have subsequently tightened up the rules governing companies listed on AIM, with a particular focus on cash shells such as Langbar.Reuse content