LeapRate's Daily Forex Industry Newsletter
Join now to receive first access to our EXCLUSIVE reports and updates.
Screenshot of a breaking news alert e-mail from Q2 2017
UK FCA financial regulator the FCA has announced that following an urgent application by it, the High Court has appointed Russell Downs, Douglas Nigel Rackham and Dan Yoram Schwarzmann of PricewaterhouseCoopers (PwC) as joint administrators of Beaufort Securities Limited, and joint special administrators of Beaufort Asset Clearing Services Limited.
The FCA took this action following an assessment of the financial positions of Beaufort Securities and Beaufort Asset Clearing Services which led the FCA to believe that both firms are insolvent. The FCA also considers it necessary for insolvency practitioners to take over the running of the firms in order to protect assets from dissipation and protect customers of both firms. This action is also necessary due to concerns that the firms may be involved in financial crime.
The FCA’s actions come after Beaufort Securities was named as part of a $50 million international securities fraud and money laundering scheme in the US. The US Attorney’s Office for the Eastern District of New York announced late Friday that a multi-count indictment was unsealed in federal court in Brooklyn, against Panayiotis Kyriacou, Arvinsingh Canaye, Adrian Baron, Linda Bullock, Matthew Green, and Aristos Aristodemou; Beaufort Securities, Beaufort Management Services Ltd, Loyal Bank Ltd (an off-shore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines); and Loyal Agency and Trust Corp., an off-shore management company located in Saint Vincent and the Grenadines.
As alleged in the indictment, between March 2014 and February 2018, Beaufort Securities, Beaufort Management, and managers Kyriacou and Canaye (collectively the “Beaufort Defendants),” together with their co-conspirators, engaged in a scheme to defraud investors and potential investors in various U.S. publicly traded companies by concealing the true ownership of various U.S. publicly traded companies and manipulating the price and trading volume in the stocks of those companies.
Beginning in or about October 2016, an Undercover Agent contacted Kyriacou and stated that he was interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals.
In furtherance of the scheme, the Beaufort Defendants opened brokerage accounts for their clients in the names of off-shore shell companies with nominee shareholders and directors, and then conducted manipulative trading of stocks of U.S. publicly traded companies listed on U.S. over-the-counter exchanges. Beaufort Securities facilitated at least ten “pump and dump” schemes involving U.S. publicly traded stocks, generating over $50 million in proceeds for its clients. Notably, Beaufort Securities had affirmed to the FCA in the United Kingdom in July 2016 that it had taken remedial measures to correct deficiencies in the firm’s financial crime controls and anti-money laundering processes.
Additionally, between January 2011 and February 2018, the Beaufort Defendants; Loyal Bank; Loyal Agency; Baron, the Chief Business Officer of Loyal Bank and a Director of Loyal Agency; and Bullock, the Chief Executive Officer of Loyal Bank and a Director of Loyal Agency, together with their co-conspirators, devised and engaged in a scheme to launder securities fraud proceeds for their clients. To facilitate this scheme, Beaufort Securities transferred funds to corporate bank accounts at Loyal Bank opened in the names of off-shore shell companies that were controlled by the bank’s clients. Loyal Bank then provided debit cards to its clients to withdraw funds from those accounts in an untraceable manner to hide the source of the money and facilitate ongoing securities fraud.
Money Laundering Through Purchase and Sale of Art
Separately, between October 2017 and February 2018, Kyriacou; Aristodemou, the uncle of Kyriacou; and Green, the owner of an art gallery in London, United Kingdom, together with their co-conspirators, agreed to launder £6.7 million, the equivalent of over $9 million dollars, which the Undercover Agent represented to be the proceeds of securities fraud. After initially proposing the use of real estate investments to launder the funds, the co-conspirators devised a scheme to “clean up the money” through the purchase and subsequent sale of art. Aristodemou described the art business as the “only market that is unregulated,” and that art was a profitable investment because of “money laundering.” The defendants proposed the Undercover Agent could purchase from Green a painting by Pablo Picasso entitled “Personnages, Painted 11 April 1965,” and provided paperwork for the painting’s purchase. The money laundering scheme was halted prior to the transfer of ownership of the painting.
The US SEC also filed a civil complaint last week against Beaufort Securities and Kyriacou.
The authorities note that charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The FCA stated that it is assisting the United States Department of Justice (DOJ) with its investigation into Beaufort’s involvement in securities fraud. The FCA has also imposed requirements on the Ffrms, with immediate effect, using its own-initiative powers under the Financial Services and Markets Act 2000 (the Act), requiring the firms to cease all regulatory activity and not to dispose of any firm or client assets without the FCA’s consent.
The FCA is conducting an investigation into the affairs of both firms and said that these actions have been taken to protect UK consumers.
The firms must also take appropriate steps to inform their clients they will no longer be able to conduct any regulated activities. The FCA also stated that the joint administrators / joint special administrators will contact all affected customers of the firms in due course.