David Pickover was "entranced" by the eloquent and dashing financier who, sporting a pink-spotted cravat and shoulder-length hair, explained how he could turn his £75,000 nest egg into £117,000 paid in monthly sums. When Kautilya Pruthi started to name sports stars and celebrities as clients, it seemed an investment club worth joining.
At first, all went well. With a promised return of up to 20 per cent a month, the cheques from Pruthi's Knightsbridge-based Business Consulting International began to roll in, netting Mr Pickover and his wife £20,000. But in late 2008 the payments stopped abruptly and then the blood-chilling realisation dawned on the retired civil servant that three-quarters of his life savings had gone.
The Pickovers were not alone in falling for the loquacious charms of Pruthi, who liked boasting to his investors that he was one of the richest men in London with a lifestyle to match. The extent of his deception became clear yesterday when he was jailed for 14 years for running Britain's biggest known "Ponzi" investment fraud.
In total, the Indian-born businessman swindled £115m from nearly 600 investors, who ranged from stars such as the cricketer Darren Gough and actor-turned-singer Jerome Flynn to the parents of disabled children. Pruthi took £38m to fund his lavish existence, but police expect to recover just £2m (barely £3,400 each) to pay back to victims who have been bankrupted or lost their homes.
Mr Pickover, who asked for his real name to be withheld out of "shame and embarrassment", said yesterday: "You can't imagine the plausibility of this man. He arrived in a big shiny car, a Bentley I think, and oozed composure and confidence. He was also terribly dapper – smart shoes, a nice suit and I haven't seen anyone wear a cravat since my own father.
"He sat down and talked me through the proposition. He dropped a few names of high-profile clients. It was like he was doing you a favour letting you into his clique."
The 72-year-old former Whitehall official added: "I think we were naive and we were conned. But this wasn't surplus cash – it was money to help us through our old age and to pass on to our grandchildren. Now it's gone and I'm devastated at this man's dishonesty."
Pruthi, 41, who began taking deposits from investors in 2005, offering annual returns of 156 per cent, epitomises a growing class of fraudster whose swagger and seeming powers of financial alchemy suck clients in. An American court found the financier and cricket mogul Allen Stanford guilty this week of a $7bn (£4.4bn) Ponzi fraud based in Antigua, and the one-time Wall Street darling Bernie Madoff is serving a 150-year jail term for the $18bn collapse of his Ponzi scheme.
In Britain, hundreds of similar investment scams are costing victims more than £200m a year. The Financial Services Authority (FSA) estimates that so-called "unauthorised collective investment schemes" akin to Ponzi frauds have raked in "hundreds of millions of pounds", while boiler-room schemes, which are share-based scams, cost £200m a year.
Like many of Pruthi's investors, Mr Pickover fell into his circle through recommendations from friends and family. By the time the scam collapsed in 2008, Pruthi, a divorced father-of-one who splashed out on lavish homes, cars and a string of lovers, had gained at least 585 clients in locations from Britain to Australia, Singapore, Hong Kong and Spain. They even included bankers with Merrill Lynch.
Using the "Ponzi" method of funnelling cash from new customers to pay existing clients to create the illusion of investment returns, Pruthi, from Wandsworth, south-west London, skimmed off a generous chunk of this income to create his image of a super-rich playboy. He owned three Bentleys, a Lamborghini, two Ferraris and a Maserati, as well as a private jet, and travelled by helicopter. His rented homes included a garden flat in Kensington and a six-bedroom house in Surrey costing £20,000 a month.
Prosecutors said he spent nearly £30,000 on his daughter's private school fees, and lavished £373,000 on a string of female friends.
As well as celebrity investors, his victims included professionals, pensioners and devotees of a meditative religious sect based in Wales. Detectives said some former investors had lost pensions, life savings and homes and been declared bankrupt.
Judge Michael Gledhill QC, sentencing Pruthi after he admitted fraud charges, told him: "You are extremely intelligent, articulate, sophisticated and plausible liar. In short, a professional fraudster. You set up and masterminded what may well be the largest and longest-running Ponzi fraud to come before the courts in this country."
John Anderson, 46, and Kenneth Peacock, 43, two business associates of Pruthi who unwittingly acted as "aggregators" for his scheme by passing on clients, were jailed for 18 months for unauthorised financial activity.
An FSA source with knowledge of the case said: "When times are hard, schemes that offer generous returns seem all the more attractive. But I'm afraid the old adage that if something seems too good to be true, then it probably is, remains very much the case."
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