City trader admits setting up £14m 'ponzi' scheme

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The Independent Online

A City trader today admitted setting up a "ponzi" scheme in which more than 350 victims were defrauded of up to £14 million.

Investors from all walks of life handed over hundreds of thousands of pounds to Terry Freeman and his company GFX Capital, seduced by the promise of big financial returns and no risk.

But the 62-year-old pleaded guilty to fraudulent trading and a string of other offences at Southwark Crown Court in London after splashing their cash on his lavish lifestyle, police said.

The fraudster from Buckhurst Hill, Essex, was accused of hiding the fact that he was losing investors' funds on the markets for several years, while spending heavily on his own luxuries, City of London Police said.

While his victims entrusted their savings to him in good faith, he was snapping up holiday homes in Cyprus and France, a top-of-the-range Land Rover, an executive box at Tottenham Hotspur Football Club and expensive gifts for his new wife, including a £120,000 diamond ring.

Millions of pounds also disappeared on botched trades and on the running of Freeman's company from offices costing £14,000 per month.

The house of cards came tumbling down in 2008 after he bought heavily into American investment bank Lehman Brothers, believing the US government was about to bail it out.

But in one of the biggest dramas of the credit crunch, the company collapsed, losing him and his clients millions of pounds.

One devastated couple had invested £1.4 million with Freeman and were told their funds had risen to £2.7 million, only to find later just £14,000 left in their trading account.

Once planning to buy their dream family home, they are now living in rented accommodation.

As they delved into the murky workings of Freeman's company, detectives discovered that as many as 700 people had invested with him.

Freeman initially managed to cover up his crimes by moving funds around Saxo Bank trading accounts and issuing false GFX statements telling investors they were all making healthy profits.

To try and ease investor concerns, and while at the height of the financial crisis, GFX announced 12% profits for the month.

Freeman also reassured his clients their money was completely safe after the massive collapse of the Bernie Madoff "ponzi" scheme in the US.

But by now his clients were growing suspicious of his continued run of success and started to demand their money back.

Around the same time, posing as an experienced trader, he invited potential new clients to a country manor house and, even as the scheme was crumbling, investors continued to deposit money with GFX.

In February 2009, Freeman reported to the Metropolitan Police in London that he was being threatened by angry investors and admitted losing about £20 million. He was arrested a few days later.

As the news spread, anxious investors approached the national lead force for fraud, with 340 victims eventually coming forward to tell their own stories of how they had been conned.

An extensive investigation culminated in Freeman pleading guilty not only to fraudulent trading but also to engaging in business while bankrupt, acting as a director while bankrupt, and acting in contravention of a disqualification order, a police spokesman said.

Three counts of money laundering were dropped.

When Freeman is sentenced on February 14, it will not be the first time he has been punished by the courts: in 1997 he was jailed for four-and-a-half years and disqualified as a director for 15 years after being found guilty of eight offences relating to bankruptcy and being a disqualified director.

Leaving prison in 2000, he changed his name from Terrence Sparks to Terry Freeman and quickly established his new financial operation.

Detective Superintendent Bob Wishart, from the City of London Police's economic crime directorate, said: "Rub away the sheen and you find Freeman is the archetypal fraudster, happy to steal money and ruin lives.

"People invested their futures with GFX, only to find they had been horribly conned by this criminal.

"Even after being caught, Freeman was still trying to blame anyone but himself. It was only after a long and painstaking investigation that he finally admitted to the huge amount of personal and financial damage he has caused."

He urged potential investors to be cautious and to carry out proper research before committing to an investment scheme.

"In these times of financial uncertainty and low interest rates, investors are looking to maximise returns," he said.

"Anyone seeking to invest in any form of scheme that offers above-average high yields of return should be mindful that criminals are out there preying on unsuspecting members of the public."