When the United States’ FBI started to investigate a Russian-linked bank located in Cyprus, it was the final nail in the coffin of a Guernsey-based pension scheme called ‘The IXG Scheme’.
That £40million scheme, which was started in 2006, had already been a decade long nightmare for many of its members. They had been contractually locked into it despite it failing to ever really get off the ground.
So, after years of struggling, when the FBI actually closed the FBME bank in 2017 for being linked with money laundering, what could have been tens of millions invested in the scheme was lost.
82-year-old Ken Williams, the director of a care home business in the UK, has been one of those to lose out, now finding himself more than £250,000 out of pocket through investment and legal fees.
The scheme is now in the hands of the Public Trustee, under the remit of Economic Development.
Mr Williams joined the scheme in 2010. It was promising to be a pension scheme that would offer all sorts of tax advantages – it used EU rules and regulations and was based offshore in Guernsey, and there was no cap to how much you could put into it, or what you could put into it.
He decided to commit to investing £1million worth of shares in his business over a long period of time, and also to paying an entry fee of £105,000 – luckily for him, he never put a single share in.
“It was all about lack of cash,” Mr Williams explained.
“The whole thing was about them needing money. They should have put their hands up at the start and said: ‘sorry guys, there aren’t enough members to keep the scheme going’, then transferred the funds to another trustee and that would be that. But instead of that they tried to keep their precious scheme going by stealing members’ money.”
Mr Williams started to question the scheme’s legitimacy when a meeting he had with its managers fell through in 2011, and he couldn’t get them to give him information on how he should pay his capital gains tax. After that, he decided he would withhold his shares.
The Public Trustee's Investigation has been playing out in a number of self-contained court cases since 2017.
But, as the scheme slowly fell apart, those managers started using the funds they had to take members to court to try and get a grip on their assets. In Mr Williams’ case, they wanted his shares, but he fought for years and managed to keep a hold of them through court.
Years later, after the FBME bank closed in Cyprus, Guernsey intervened. In 2017, its Courts and Public Trustee took possession of IXG and are now slogging through the arduous task of trying to reclaim lost money and investigating what happened.
IXG’s origins were solid; having been established by experts from HMRC and the Treasury, but retrospectively, it was clear things were going wrong from the start.
In the four years between the time the scheme started, and the end of 2010, it had seven separate trustees in Guernsey.
It was only when a legal issue arose between the seventh trustee and the administrators of the scheme that the cracks started to show properly. That court battle played out messily, and eventually IXG uprooted entirely from the island.
FBME was put into administration by the Bank of Cyprus after the FBI intervened.
The money was moved to Cyprus, and two new companies were set up in the Seychelles to be both the administrators and the trustees. It is now clear both those companies were linked to the people behind the scheme, so once IXG had left Guernsey, they had total control. Guernsey’s Court has also revealed they were unregulated.
At this point, members had started to worry, Mr Williams included.
Now it is clear how much he lost out by ever getting involved in the scheme. He had to put his business into administration and spend a huge amount of money fighting in court, and is £355,000 out of pocket.
“There were not enough people that joined the scheme – it was not a Ponzi Scheme or anything like that, but it just didn’t get the membership,” he said.
“What members signed up for was an initial contribution and a yearly management fee of half a percentage point, so that was their only source of income, and it was not enough with the number of members.
“In a nutshell, Guernsey should have never allowed IXG to take the funds away from the island. It is simple as that really. We don’t expect there will be any money left, but we think the people behind it should put all they have left into the IXG pot.”
Charles Russell Speechlys have been appointed to act on behalf of the PT in this case. (image from Tripleplay)
Right now, the Public Trustee, under the remit of Economic Development and represented by London law firm Charles Russell Speechleys, continues to take legal action against IXG and all of its associated companies trying to reclaim assets.
In March, for example, the Bailiff legally awarded the Public Trustee a UK Timber Yard from the scheme, but as has been the case in all of these small court cases, no representatives from IXG appeared.
A spokesperson for the Office of Economic Development said this of the ongoing proceedings: “This case is a complicated and ongoing piece of work. It has and continues to involve various legal proceedings and it is important those proceedings are not prejudiced by comments made in the media. For that reason, it is not possible to comment further at this stage. It is recognised that this process can be frustrating for some individuals who have been affected by this case and their patience is appreciated.”
For Mr Williams, this is a case of wanting answers.
He said he wanted to try and reclaim his lost money – something he said was a sentiment shared by all of the members – and he was tired of waiting for progress that didn’t seem to be forthcoming.
“I had to fight to keep my company. We have spent in excess of a quarter of a million pounds in legal fees, and we are still suffering from the effects of that. We just want a result.”