The Financial Conduct Authority has agreed a High Court settlement to return around £380,000 to investors in a land bank.
The case concerned St Clair Estates which owned a disused airfield in Winkleigh, Devon, which was divided into separte plots in 2006.
The plots were sold to consumers initially by St Clair Estates Ltd and Elizabeth Fischer, a former director of St Clair and later by OFG Investments, Option Land UK Ltd, GIG Properties Ltd, Mehmet Husnu and Ali Seytanpir.
The plots were sold with the promise that investors would make a significant profit when the land obtained planning permission and was sold to a developer.
The FCA believes more than 70 investors were sold plots of land paying between £6,000 and £12,000 for each individual plot of land with total sales of £2,209,296.
In agreeing to the settlement, St Clair Estates and Elizabeth Fischer accepted they had run an illegal land bank by operating a collective investment scheme without FCA authorisation.
OFG Investments, Option Land UK, GIG Properties, Mehmet Husnu and Ali Seytanpir agreed to pay the full amount of the FCA’s claim.
They also accepted an FCA restraining order which prevents them from operating any other collective investment scheme or being involved in a similar business selling land.
The FCA began the court battle against the firms and individuals in December 2011. The regulator obtained a court order freezing the bank accounts of the companies and individuals involved and injunctions preventing them from selling more land to investors.
The settlement will result in payment of approximately £380,000 from frozen bank accounts to the FCA.
The FCA will then seek an order from the High Court to pay this sum to investors. The defendants’ assets will remain frozen until the terms of the settlement have been complied with.
FCA enforcement and financial crime director Tracey McDermott says: “While investors will only get a fraction of their money back, the settlement represents a better outcome than would have been achieved for consumers if the FCA had fought the case all the way to a final hearing.
“It underlines the FCA’s commitment to achieving the best outcome for consumers, but is something of a bittersweet outcome.
“Unauthorised collective investment schemes continue to represent a major source of loss for consumers. Consumers should therefore continue to be acutely aware of the huge risks involved when investing money with unauthorised businesses given that the prospects of getting any money back are always slim.”