THE Serious Fraud Office (SFO) in London yesterday confirmed that former British resident in Majorca and director of Gilher Inc, John Hirst, has officially been charged by Bradford Magistrates Court in connection with running a 10 million pound Ponzi investment scheme.
A Ponzi scheme is an allegedly fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organisation, but from their own money or money paid by subsequent investors.
The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent.
The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
While the system eventually will collapse under its own weight, the example of Bernard Madoff's investment scandal demonstrates the ability of a Ponzi scheme to delude both individual and institutional investors as well as securities authorities for long periods: Madoff's variant of the Ponzi scheme stands as the largest financial investor fraud committed by a single person in history.
According to the SFO, the Ponzi scheme in Hirst's case apparently targeted British nationals and other expatriates living in Majorca, as well as investors in France and the USA and while over 10 million pounds was obtained from investors with losses believed to be around six million pounds with many of the victims living here on the island.
In an official statement the SFO said yesterday John Neil Hirst was charged on 16 March 2011 at Bradford Police station with the following:
n One count of conspiracy to defraud, contrary to Common Law
n Two counts of money laundering.
He will appear at Bradford Crown Court on 13 April and has been released on conditional bail (residence, no overseas travel, surrender of passport, not to contact prosecution witnesses).
The SFO added that Gilher Inc was a Panama and Seychelles registered company, operated by Hirst, which invested funds on behalf of private clients who were mainly based in the UK and Spain.
The investigation started in November 2009 following complaints made to the SFO by investors and has been investigated with the assistance of West Yorkshire and Surrey Police and overseas law enforcement authorities.
The SFO investigation is still continuing in regards to the involvement of a number of additional individuals.
Sources close to the investigation admitted yesterday that they are surprised that Hirst has been called to reappear in a Crown Court so quickly, although they did stress that next week's court appearance could be the start of a long drawn out process involving both British and Spanish police.
And, because of the length of the sentences Hirst could find himself facing, the case has been referred to the Crown Court in Bradford.
It will also have to be decided on whether he is going to be tried by a single judge, or by judge and jury.
The SFO usually prefers a single judge because fraud cases are so complicated, members of the jury often get lost, the source added yesterday.
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