Keydata: SFO now investigating Lifemark

16 April 2010 4:22 pm | By Hannah Stodell

SFO officially launched an investigation into Keydata in July after being called in to examine a suspected fraud following the disappearance of over £100m Keydata products invested in Luxembourg based vehicle SLS Capital. It has now widened its investigation into the activities of Luxemourg based company Lifemark which undertook the same business as SLS but was under different ownership.

Around 23,000 Keydata clients invested £349m in Lifemark through plans including the secure income bond 4, secure income plan and the defined income plan.

In an update today, the SFO says it has not traced the ultimate destination of all SLS funds but that “a sizeable proportion of funds” has been traced. It confirms that assets were liquidated and funds were misappropriated in order to meet other business needs of deceased businessman David Elias, the then ultimate beneficial owner of SLS, to the detriment of Keydata and other investors.

As part of the SFO investigation, the activities of SLS have been subject to review. SFO says investigations show no evidence of SLS having taken out any hedging to cover the currency risk from proceeds of the life policies which required interest to be paid in sterling and premiums which were denominated in US dollars.

SFO has received some assistance from overseas in relation to the assets and continues to work closely with the FSA, administrator PricewaterhouseCoopers and a number of IFAs.

Lifemark issued a notice to bondholders on March 3 declaring that several bonds underpinning Keydata plans had defaulted on income payments. It suspended income payments to investors in order to preserve liquidity to maintain payments of insurance premiums under the existing policies.

Concerns about a potential “liquidity gap” relating to certain Keydata Lifemark bonds (secure income bond four and secure income plan) surfaced last July in a High Court case between the FSA and Keydata founder Steward Ford who is understood to have set up Lifemark with other business associates and remains a major shareholder. Ford filed an injunction to prevent the FSA from accessing information stored on a seized Keydata server.

Lifemark’s directors are now working on a restructuring programme and proposals are expected to emerge in the coming weeks.

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