Edinburgh company director jailed for seven years over £18m Ponzi scheme

Stephen Farley established his business through cold calling potential investors and then providing a false picture of the returns on their investments.

Speaking following the sentencing, Liam Murphy, Procurator Fiscal for Specialist Casework, said: “Stephen Farley convinced hundreds of people to provide him with their own money on the basis of false promises and concocted financial statements. He used their investments to finance his business and personal spending.

“After a detailed a complex investigation, he has now been brought to justice, banned from being a Director, and faces imprisonment.

“I would urge those who are concerned about any funds they have invested to check with the Financial Conduct Authority that the companies they are dealing with are legitimate.”

Members of the public can search the FCA’s database of registered businesses and key individuals at the following link: register.fca.org.uk

In 2004 Farley purchased Cameron Farley Ltd (“CFL”), the company through which he would orchestrate the fraud, for £150.

In its early days, the business operated from a single-person office on Edinburgh’s St Andrews Square, and advertised itself as an Introducing Broker which had strategic partnerships with industry leaders.

CFL began building its client list by simply cold-calling potential investors. Some were called by Farley himself, while others were contacted by employees working from a script which Farley had prepared.

The clients believed that their funds were being traded on financial markets by CFL via Gain Capital, a currency trading platform. As the client list grew, and encouraged by the false statements which Farley provided, some investors began to refer others to the company. Still more contacted CFL directly, having heard about the profits being made by friends or acquaintances.

Contrary to what he told his clients, the vast majority of their investment was in fact deposited into CFL’s main bank account, where it was used to pay rent, staff wages, other running costs of the company and for personal spending by Stephen Farley.

As most of the clients dealt with CFL rather than Gain Capital, Farley was free to present them with an entirely false picture of their investment and any returns.

As with any Ponzi scheme, the company was kept afloat only by increasing the volume of investment. By 2006 CFL advertised itself as providing assistance and advice on a range of financial services including savings, investments, property, equities and life assurance.

Farley later increased the minimum investment from £1,000 to £5,000, offered payment of commission to those who made introductions, and pretended that a new time-sensitive “Euro option” had been introduced which required the investment of further funds by a certain deadline. In reality, trading on Euro in this way was always a possibility and such trades could be carried out at any time.

His scheme came to an end in 2008, following an intervention by Police and what was then the Financial Services Authority. By that stage he had twice failed exams which were pre-requisites to him being authorised by the Financial Services Authority.

A group of 452 investors successfully brought an action against Gain Capital, which concluded earlier this year.