FCA Wins Civil Case Against 'Ponzi' Care Home Scheme That Lost Investors £57 Million

Between 2016 and 2020, two of Forster’s Qualia Care companies, Qualia Care Properties and Developments, offered investors the opportunity to invest in the third company in the group, Qualia Care. The opportunity involved buying a long-term lease in a care home run by the third company and then sub-letting back to the Qualia companies. These leases cost between £50,000 – £70,000 and promised ‘returns’ of 8-10% on the purchase price over the lease duration.

According to the FCA, 380 investors were convinced to invest in the illegal scheme, which amounted to an ‘unauthorised Collective Investment Scheme’ (CIS) and operated like a ‘Ponzi’ scheme:

• A CIS is an arrangement that enables investors to contribute to, and effectively ‘pool’ their respective assets within, a fund scheme and have these professionally managed by an independent manager.
• A ‘Ponzi’ scheme is a form of investment fraud that relies on the fraudster using money from new investors to fund a non-existent investment scheme.

Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA, said:

“Mr. Forster didn’t just put investors’ funds at risk by selling investments in an unauthorised scheme that was not sustainable, he also put at risk the wellbeing of residents of the care homes, many of whom were vulnerable. Mr Forster’s reckless behaviour put investors at serious risk, and we will now seek compensation for them.”

We have covered Ponzi schemes several times on our blog, including outlining which red flags investors should look out for and how to protect yourself from being targeted.

Action Fraud, the National Fraud and Cyber Crime Reporting Centre, recently produced a guide to spotting and avoiding Ponzi schemes on its website with a list of tips to consider when investing, including:

• The number one rule of investing: if it seems too good to be true, it probably is.
• High returns can only be achieved with high risk; ‘guaranteed risk-free’ investments do not exist.
• Check the FCA register before investing to make sure that the company you are using is legitimate and registered.
• Don’t be afraid to ask questions of the ‘broker’, the investment firm, the scheme, and even the board of directors; if the opportunity is legitimate, this shouldn’t be an issue as they don’t have anything to hide.

You may have used telephone or internet banking to transfer the funds if you paid into a Ponzi scam. Money can almost instantly be transferred from UK bank accounts thanks to the Faster Payments Service, a process that fraudsters understand and frequently abuse.

When a customer authorises their bank to transfer money to another bank account, thinking the transaction to be for a valid reason, this is referred to as Authorised Push Payment (APP) fraud.

In a Ponzi scheme, the victim believes they are making a legitimate investment, but the fraudsters never use their funds as intended. They will likely move them to another account, typically overseas, often making them impossible to track down or retrieve.

Sarah Spruce, Head of TLW Solicitors’ Investment Fraud team, commented:

“Returns of up to 10% will turn anyone’s head, but, unfortunately, those numbers are always going to be highly unlikely, and usually the hook for a scam. Would-be investors should remain vigilant and conduct thorough due diligence before proceeding with any investment, particularly any claiming returns like this!

If you have lost money to the illegal Qualia investment scheme or any other similar unauthorised CIS or Ponzi-like scheme, get in touch, and we may be able to help you recoup some of your losses on a ‘no win, no fee’ basis.”