| FSA bankrupts fraud accomplice |
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| Written by Adrie van der Luijt | |
| Friday, 27 June 2008 | |
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The Financial Services Authority has obtained a bankruptcy order against a boiler room operator.
Samuel Kahn controlled the affairs of Chesteroak Limited and Bingen Investments Limited, two UK based companies that helped boiler rooms illegally sell shares to investors. Overpriced shares Boiler rooms are not authorised by the FSA. They act illegally by promoting and selling shares in the UK that may be overpriced, restricted for onward sale and/or have little or no real value. The boiler rooms then often vanish, leaving the investor out of pocket. Boiler rooms are mainly based outside the UK and therefore the FSA is usually unable to take direct action to shut them down. Kahn admitted liability for claims totalling up to £3.7m in October 2007 made by the FSA on behalf of about 800 UK investors, but disputed the amount. He then placed himself into an individual voluntary arrangement (IVA) to try to defeat the FSA’s claim. As a result, the FSA applied for Kahn’s bankruptcy so a claim for the full amount he owed to investors could be made against his estate. Money back Jonathan Phelan, head of retail enforcement at the FSA, said that the regulator would use every power available to it under the law, including freezing assets and making people bankrupt, against any UK company or person who helps boiler rooms steal money from investors. He explained that the bankruptcy order would ensure that Kahn’s affairs are investigated which could mean that investors get some of their money back. “Investors should always check that the firm they are dealing with is authorised so they have access to the complaints and compensation schemes if things go wrong,” Phelan warned. Assets frozen The bankruptcy order follows the liquidations of Chesteroak and Bingen in September 2007 after the FSA alleged that they were dealing in shares or arranging deals in shares without authorisation. The FSA obtained interim injunctions against both companies and Kahn in January 2007, freezing their assets and other assets under their control. Chesteroak and Bingen were also stopped from continuing their involvement in assisting boiler room activities. The two firms were not authorised by the FSA so investors cannot make a complaint to the Financial Ombudsman Service or claim compensation from the Financial Services Compensation Scheme. Related articles
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