The FSA has secured a court order requiring over £1m to be paid in redress to victims of a boiler room scam.
A ruling at the High Court in London yesterday found that Sinaloa Gold had offered shares to the public through boiler room fraudsters, and without the required prospectus.
The judge also ruled Sinaloa director and US resident Lawrence Hoover was knowingly involved in Sinaloa’s breaches.
Both Sinaloa and Hoover were ordered to pay a total of £1,097,092.11 to the FSA to distribute to the victims. They have also been ordered not to dispose of any assets held worldwide until the payment has been made.
In December 2010, the FSA obtained an injunction and freezing order against Sinaloa and Hoover securing £127,000. This means that despite the court order of over £1m in redress, currently only £127,000 is available to be repatriated to victims.
Between August and December 2010 consumers were cold called by at least 12 boiler rooms which offered shares in Sinaloa, a UK incorporated company. Victims were told the company was raising funds to develop a gold mine in the Sinaloa region of Mexico.
However, the FSA found no evidence that Sinaloa held any interest in the mine and that up to 90 per cent of the money raised from consumers was paid to the boiler rooms and to persons associated with Hoover.
The names of the boiler rooms selling Sinaloa shares included PH Capital Invest, Tudor Asset Management, First Geneva Wealth Management, Invest Direct Group, J.P. Brown & Partners, Steiner Haus Capital and UTC International Services.
Deputy judge of the High Court John Jarvis QC says: “The evidence indicates to me Sinaloa was set up purely as a vehicle to issue shares to the public and Mr Hoover was an integral part of that operation. Sinaloa was a sham operation. Mr Hoover knew all that was going on and took an active part in the scam that took place.”
FSA acting director of enforcement and financial crime Tracey McDermott says: “The case against Sinaloa and Hoover demonstrates we are prepared not only to take action against companies involved in the promotion and sale of their shares by boiler room fraudsters but where possible, we will also take action against the people behind these scams, whether in the UK or overseas.
“It should however serve as yet another reminder that dealing with unauthorised businesses carries a great deal of risk.”