SOS investor wins judgement against Central FX.
Investors and followers of the Bar Works workspace investment fraud will know we have long held the opinion that the relationship between Bar Works and Central FX (their preferred and recommended FCA-regulated currency exchange company in the UK) was irregular and highly questionable.
As a result of our investigations into Bar Works we believed Central FX was complicit in aiding the expansion of the Bar Works Ponzi Scheme by failing to comply with the strict compliance requirements required under UK financial services regulations. In other words, we felt Central FX was not the arms’ length service provider it should have been.
It has always been our belief that the Bar Works – Central FX relationship was damaging to investors’ interests and that Central FX was operating in breach of a number of UK financial services regulations which had the ultimate effect of assisting Bar Works in perpetrating what has already been determined in the US courts as investment fraud.
More than two years ago one of our team, Keith, filed a claim with Central FX for a full refund of a client’s investment in Bar Works. The sum involved was US$ 100,000. The claim was dismissed out of hand by Central FX who advised that the client should seek the recovery of her money from Bar Works. Central FX already knew at that time that Bar Works had collapsed, millions had gone missing and the owners were being prosecuted for fraud.
We did not accept the Central FX rebuttal and elevated the case to the UK’s Financial Ombudsman Service (“FOS”). The FOS is responsible for adjudicating on disputes between ordinary consumers and companies regulated by the UK’s Financial Conduct Authority.
We are pleased to report that the FOS has now adjudicated that Central FX failed to comply with UK regulations and has recommended to the company that they refund our client in full (less any payments she received from the investment). The FOS has recommended that Central FX pay US$ 93,000 to our client. Our client has accepted the judgement and informed the FOS accordingly. Central FX has a right of appeal but the FOS examiner has presented a strong case for his findings and was very clear in the reasons for his judgement.
All cases are different and our client had some issues which were specific to her claim and not relevant to other investors, e.g she had made it clear that the money was not to be released until she had signed a contract with Bar Works, but Central FX released her money anyway. However, the examiner has considered some of the other allegations we made in our submission which do relate to our other investors, namely that investors believed they were investing in a USA company operating out of the USA and that not one single investor had any idea their money was actually being sent by Central FX to a bank account in the Bahamas.
For those who do not know anything about the Bar Works investment fraud there is a lot of information available on the internet, but it can be summarised very simply as follows:
1. The workspace investments were offered by Bar Works Inc, a US Delaware-incorporated company.
2. Investors signed up to rent their workspaces to Bar Works Management Inc, a subsidiary US company in return for a guaranteed rental payment each month.
3. Investors were pushed towards Central FX to change their GBP, Euros, Dirhams, Krone etc into USD to be transferred across to Bar Works. Investors believed the money was going to the USA.
The client account at Central FX was titled “Bar Works 97901”. No investor knew or was informed that this account actually belonged to Bar Works Services Inc, a Bahamas company established by serial conman Renwick Haddow.
We could write a book on this fraud, but we’ll let the FOS Examiner sum it up. He said
“I think it is clear that Central FX would have had sight of the promotional information that potential ‘Bar Works’ investors were being provided with….”
“I also think Central FX should have questioned why any payments that ‘Bar Works’ investors were looking to make were being sent to Bar Works Services Inc, to an account in the Bahamas – particularly as the promotional material isn’t clear and transparent on this”.
“Bearing this in mind – along with the number of ‘Bar Works’ investors that Central FX provided services for; the amount of money being sent across; and the commissions it would have received – I can’t see how it’s taken reasonable care as per [the regulations] in not carrying out any due diligence [our bold] on Bar Works Inc, Bar Works Management Inc and indeed Bar Works Services Inc”. [Our comment: the FOS Examiner is stating that Central FX didn’t even carry out due diligence on the company which held the account].
“….my view is that Central FX should have taken what I consider to be fairly basic steps to protect both itself and its customer from the risk that it would be used to further financial crime”.
“If it had taken these steps I’m satisfied it would have identified that payments weren’t going where these customers had intended and that there was a high risk this was investment fraud”.
“……it opened itself up to the risk of being used to further financial crime – and exposed its customers and their money to an unnecessary and unreasonable level of risk. This is why I’m of the opinion that it’s fair for Central FX to bear responsibility for the losses that [Client Name] – and other Central FX customers suffered [our bold] – from Central FX facilitating their payments to ‘Bar Works’.
“THE LOSSES THAT [NAME] AND OTHER CENTRAL FX CUSTOMERS SUFFERED…..” That’s a hugely significant and important statement for all investors who used Central FX to invest in Bar Works. We know a lot of investors who used Central FX as the currency exchange provider to invest in Bar Works.
There is a second group of investors who also had a financial relationship with Central FX and will be wondering how this affects them. Their issues were not specifically addressed by this report, but we believe their claims are significantly strengthened by this outcome and we will be working alongside their legal representatives to scrutinise this report in detail. The solicitor has advised that he will write to all clients in the next seven days.
The only caveat to this article is that Central FX does have a right to appeal the judgement and we will wait to see if that happens. In our opinion their appeal is unlikely to succeed if the FOS Examiner is correct that they didn’t actually carry out any due diligence on Bar Works Inc, Bar Works Management Inc and Bar Works Services Inc. It makes one wonder if that failure to carry out due diligence extends to other failed investment schemes with which they may have had some involvement.
This judgement is undoubtedly fantastic news for some of the hundreds of investors who lost money in the Bar Works fraud.
SOS Investor Wins Judgement Against Central FX is proof that if you stick at it and keep challenging on behalf of smaller investors you can prevail. It’s not quick and the outcome is never guaranteed, but if you know you are right then don’t give up the fight.