The Financial Conduct Authority (FCA) is to reunite £380,000 with dozens of investors in an illegal land banking scam.
St Clair Estates Ltd owns a disused airfield in Winkleigh, Devon, which in 2006 was divided into separate plots. The plots were sold to consumers initially by St Clair Estates Ltd and Elizabeth Fischer (a former director of St Clair) and then latterly by OFG Investments Ltd, 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 that over 70 investors were sold plots of land paying between £6,000 and £12,000 for each individual plot of land. Total sales were £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 Ltd, Option Land UK Ltd, GIG Properties Ltd, Mehmet Husnu and Ali Seytanpir agreed to pay the full amount of the FCA’s claim and to permanent restraining orders which prevent them from, amongst other things, operating any other collective investment scheme or being involved in a similar business selling land.
The FCA commenced civil proceedings against these companies and individuals in December 2011.
The FCA 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.
Had a settlement not been achieved it is likely that the defendants’ frozen assets would have been used to meet legal costs, significantly reducing the amount to be returned to investors.
The FCA does not regulate the sale of land, but land banking can amount to collective investment – something that does require FCA authorisation.
The companies and individuals named above have never been authorised by the FCA to sell land in this way so their activity was unlawful.
Furthermore, as their business activities were unauthorised, victims of the scheme were not covered by the Financial Services Compensation Scheme. Involvement in these types of schemes often represents a major source of loss to investors.