Company Director Disqualified for 11 Years Following Property ‘Ponzi Scheme’

Between 2015 and 2019, Sam Eustace and Kingsman Property (previously named Samuel James Ltd) offered property owners guaranteed year-round rent and promised investors annual returns of 30% by investing money into rental housing for multiple occupancies (3 tenants or more).

Eustace took at least £6.7 million from investors and paid out just over £3 million back, but this money had not been accumulated on the investment – it was taken from new investors coming on board to invest their money – the definition of a Ponzi scheme. Mr Eustace also paid himself dividends of £400,000 between November 2017 and June 2019 before the company went into liquidation in August 2019, owing nearly £5 million.

In 2022, Eustace admitted to causing Kingsman Property to trade ‘with a lack of commercial probity’ which included falsely representing the likely returns investors might expect to see. As a result, he has been banned from operating as a company director until March 2033, which prevents him from directly or indirectly ‘becoming involved in the promotion, formation or management of a company’.

Victims of Ponzi schemes are often sold an ‘incredible opportunity’ and will begin to see returns at the beginning, but – as in the case of Kingsman Property – these are generated purely by signing up new investors, not by the asset itself making money.

The National Fraud and Cyber Crime Reporting Centre website Action Fraud has produced a guide to help explain Ponzi schemes; if you’re a budding investor, check out some top tips for spotting and avoiding Ponzi schemes.

Ponzi schemes, are unfortunately, becoming more common – here is an example that we recently featured involving an illegal lottery syndicate scheme. It is crucial to be vigilant, carry out your own research and gather as much information as possible before committing to an investment scheme.

You can safeguard yourself from a potential Ponzi scheme in a number of ways:

• Investments referred to as “guaranteed risk-free” do not exist; with higher expected rates of return comes higher risk.
• Be wary of technical jargon since con artists often use it to dazzle and perplex; the language may be deliberately confusing and uninformative.
• Fraudsters frequently use pressure tactics, such as a time-limited offer, to encourage you to make a quick decision without giving you a chance to consider all the details, do your own research or to get expert help and advice.
• With glitzy websites, attractive job titles, and meetings in posh locations, scammers can quite easily make themselves appear and sound real. Investigate the company’s standing, look up reviews, and verify the scheme’s integrity by conducting your own background research and checking that all the contact information is legitimate.
• Before registering, confirm that the company you are considering is real and that there are no warnings against it by checking Companies House and the Financial Conduct Authority (FCA) register. Genuine businesses should be fine answering your enquiries about them, their staff, or the scheme. Not responding to or ignoring your queries are a red flag.
• Last but not least, if anything sounds too good to be true, it generally is!

If you, a friend, or a loved one has been – or is currently – a victim of a property Ponzi scheme, Action Fraud has outlined a list of actions you should undertake immediately to safeguard your money or avoid losing any more:

• If you believe you’ve come into contact with a Ponzi scheme, report it to Action Fraud by calling 0300 123 240 or online.
• If you think you are actively participating in a Ponzi scheme, break off contact with the fraudsters immediately and do not invest any more money.
• If you’ve given the fraudsters your bank account details, alert your bank immediately.
• Keep any written communications you have received from the Ponzi scheme. They may help you give evidence to the authorities.

Many property Ponzi schemes involve an element of Authorised Push Payment (APP) fraud, as victims are encouraged to willingly move money out of their bank accounts without realising that the purpose is fraudulent.

In the UK, banks have a responsibility to safeguard consumers from potential scams by putting in place robust procedures to halt or block scams as they happen. If you do not believe that your bank did enough to warn or prevent fraudulent activity on your account – and the bank is refusing to refund – you can make a complaint to the Financial Ombudsman Service (FOS). FOS is a Government-backed body responsible for resolving disputes between financial services providers and their customers.

Sarah Spruce, Head of the APP fraud team at TLW Solicitors, commented on the Kingsman Properties Ponzi scheme:

“Ponzi schemes are sometimes tricky for victims to spot in the beginning as, by their very nature, some investors do see initial returns on investment. However, the entire scheme relies on recruiting new investors, so it can quickly implode, leaving victims considerably out of pocket.

We have received several enquiries from victims of Sam Eustace and Kingsman Properties, who were sold an ‘incredible investment opportunity’ that turned out to be a poisoned chalice.

If you, a friend, or a loved one has been duped by this property Ponzi scheme (or any similar property related investment scheme), we would encourage you to get in touch as soon as possible for an initial conversation about your case and how our experienced team might be able to help you.”