British 'mini-Madoff' living in fear

Alleged rogue trader Terry Freeman's house has been vandalized

Yesterday Bernard Madoff arrived in a bullet proof vest as he arrived at a New York court accused of running a massive Ponzi scheme which lost investors billions of dollars. He is yet to be sentenced and remains in custody until June.

Madoff’s arrival in a bullet proof vest indicates the building anger towards rogue traders who have lost investors’ money. Although not on the same scale as Madoff, a British trader is also said to be in fear for his own safety following his arrest in February [BBC].

Arrest

Terry Freeman, 60, was arrested by City of London police who would only say that their Economic Crime Department had begun an investigation into GFX Capital Markets Ltd., a licensed, but separate, affiliate firm of the Swiss-based GFX Capital.

The Swiss firm grants clients like Freeman limited power of attorney, enabling them to act as effective “money managers” and solicit their own clients to trade on the GFX platform. Investors in Freeman business gave him the power to place trades, disburse money and pay fees in their name, though “critical account functions”, such as cash withdrawals, were supposed to remain with the investors.

GFX’s trading platform is run by Saxo bank, a Danish bank specialising in providing currency speculation services for retail clients across Europe. According to a Saxo bank spokesman, GFX Capital were an “institutional partner”. Saxo and GFX clients may prove to be big losers in the affair and Saxo’s lawyers are said to be looking into the case as a matter of urgency.

Speculation over disappearance

The tangled nature of Freeman’s affairs may take some time for authorities to unravel. However, the alleged fraud is already estimated to be in excess of £40 Million. Dubbed a ‘mini-Madoff’, Terry Freeman disappeared from his home on the outskirts of London. Speculation grew on internet forums as to where the trader had gone. Some suggested he may have fled to an apartment in Cyprus, said to be owned by Freeman.
The property is described as a “luxury resort apartment” close to the beach and town centre. The property which has a large living area, a balcony with sea views and access to a communal pool area, is a 5 minute walk to Paphos beaches and World Heritage Sites according to the property rental website Owners Direct. The website has been removed since Freeman‘s arrest.

Anger amongst investors

Since it was revealed Freeman had changed his name and continued trading despite being a disqualified director, anger has grown amongst those who have lost thousands in his so-called Ponzi scheme.

In mid-February, a week after his arrest, the Financial Times said Freeman had changed his name from Terry Sparks and that he had been authorised to act as a director by the Financial Services Authority more than two years ago. This in spite of being barred from taking such a role in companies until 2012.

The revelation has gathered investors together with many now seeking compensation from the FSA [Times]. The multimillion-pound compensation claim is the latest in a series of problems facing the regulatory body. In recent months they have been accused of being negligent in its monitoring of Northern Rock, the financial institution which ran into trouble last year.

“Living in fear”

Terry Freeman has not personally updated his blog since late January. However updates are still being posted.

Meanwhile Terry Freeman continues to protest his innocence. In a letter to his clients Freeman talks about how he has been continually libelled and slandered. “My right to a fair trial is constantly being compromised,” Freeman says. He also talks about how he has been living in fear. “My life and those of my family have been threatened continually, to the extent that I am effectively being forced to live a hand to mouth existence, under constant and real threat, unable to return to our home address,” Terry Freeman says. He also insists that he has not absconded and will defend himself vigorously in court. “I have not ‘disappeared’ and I am not living in a villa in the Cayman Islands,” Freeman tells his investors. “The reported ‘losses’ are obscenely exaggerated...and I expect to contest any allegations and charges and to be completely vindicated.”

The trader has much to fear. The anger amongst his clients has already spilled over with his house being vandalised. Obscene graffiti has been daubed on the property and white paint has been splashed on his windows. Police have said they are concerned but have yet to increase security around the former trader [Times / Daily Telegrapg]. It is not yet clear when any action by investors will start against the FSA, nor if any charges will be made against Freeman himself. It may be months before the true facts are exposed.