The UK's Financial Conduct Authority (FCA) is set to return more than £3.4m to victims of a series of unauthorised deposit taking and collective investment schemes.
Between 2015 and 2017 Digital Wealth and Outsourcing Express, which was also known as Kerchiing, is alleged to have been involved in the online purchase of wholesale goods from China for onward sale and promising unrealistically high returns, in some cases up to 100% of the amount invested.
In reality, no significant trading was conducted and the schemes relied on a continuous flow of new investors to fund existing investors' returns.
In this case, we managed to save some money for investors: too often it is too late."
By the time the FCA "took immediate enforcement action" to prevent disposal of remaining funds, according to the regulator, the schemes ultimately raised just over £15m from over 1,000 individual accounts.
Of the £15m that was raised, £9.3m was paid out to investors as returns, while the directors spent "about £2.7m", including "significant sums on travel, hotels and retail goods", The FCA said.
A shortfall of nearly £3.3m was identified in the Digital Wealth deposit taking scheme in addition to just over £0.8m in the Outsourcing Express collective investment scheme.
The schemes were run by Samuel and Shantelle Golding, who admitted to the court they were personally involved in these contraventions.
The FCA has recovered £3.4m for return to investors from various bank accounts containing the proceeds of the schemes, which will now be returned to 356 qualifying investors in the DWS scheme and 250 qualifying investors in the OEL scheme.
Executive director of enforcement and market oversight at the FCA Mark Steward said the regulator "took action as soon as it became aware of these illegal schemes", thereby "preventing further losses to future investors who would be unable to exit the scheme before it inevitably collapsed".
He added: "In this case, we managed to save some money for investors: too often it is too late. These firms were not authorised by the FCA and as we always say to consumers, if a scheme looks too good to be true, do not invest.
"We have worked very hard to identify people eligible to receive compensation from these schemes and are pleased to have been able to recover and return some of their money."
(First published by our sister title Investment Week)