The lawsuit centres on foreign exchange trading company Capital World Market (CWM), which promoted a fund offering 5% interest per month with permission to withdraw funds with as little as 30 days’ notice.
The company’s London office was raided in March 2015 with 13 people arrested following a City of London police investigation into alleged fraud.
Evidence collected suggested that representatives of CWM targeted and defrauded hundreds of members of the Ghurkha and Nepalese community.
According to Cayman Compass, a writ of summons was filed with the Cayman Islands’ grand court on 11 July 2016 alleging that, instead of being invested in forex, the money was instead used to pay off previous investors in CWM and its associated companies.
It alleges that none of the CWM group companies deposited the investors’ funds into segregated accounts, but instead used them to pay for personal or company expenses.
“Although CWM appeared to (have) trading desks at its offices in London, which were shown to potential investors to encourage them to invest, no trading took place and the trading screens ran demonstration software,” the writ states.
Previous investors were paid with current investors’ funds to keep up the appearance that the company was earning money, the lawsuit alleges.
Investors have alleged that a significant portion of the funds invested in the scheme were deposited into the accounts of DMS Bank & Trust, a Cayman Islands Class B [not locally operating] bank.
Most of that money cannot be accounted for, the lawsuit claims.
“Of the circa £50m received in the DMS Bank & Trust accounts from investors, only about £1.2m remains in the CWM BVI account and approximately £100,000 in the Treasure Trove account,” the writ alleges.
According to court records, Treasure Trove was one of the companies owned by CWM chief executive Anthony Constantinou.
Denied and defended
DMS founder Don Seymour has denied the claims against his company’s bank saying that they would be “vigorously defended”.
DMS sued the former managing director of its bank, Jazeb Jones, in 2015 for entering into an “inappropriate” business relationship with two bank clients and receiving “excessive gifts” in exchange.
The CWM investors’ July 11 lawsuit surmises that Jones’s two clients were either BVI-based CWM and Constantinou, or CWM and Constantinou-owned Treasure Trove.
It has been alleged by investors that Jones must have known about the “dishonest, fraudulent, illegal or commercially unacceptable conduct” by CWM, and that he attempted to cover his activities by communicating privately with Constantinou and/or an associate of Constantinou’s, instead of using DMS company communications.
When bank directors discovered the client relationship with CMW, it was noted that “several red flags were raised” and that Jones was ordered by DMS directors to drop the relationship with CWM. He did not do so, the writ states.
The writ also alleges that DMS Bank & Trust should bear some legal responsibility for employee Jones’s conduct in orchestrating the scheme.
“The other DMS Bank & Trust directors acted negligently,” the writ states. “Having decided, rightly, that DMS Bank & Trust should not engage in further business with CWM and having instructed the closing of the DMS Bank & Trust accounts, they failed to ensure that the same were closed,” the lawsuit states.
“DMS Bank & Trust is liable to pay damages to the plaintiffs.”