Victims affected by the London Capital & Finance (LCF) debacle are pressing Google to reimburse tens of millions of pounds that were expended on deceptive digital advertising to endorse the purported “Ponzi scheme.”
During a recent session at the High Court, it emerged that a marketing agency acting on behalf of LCF remitted over £20 million to Google for promoting its financial offerings. A substantial portion of the 11,500 individuals who invested in LCF did so after encountering it through Google. LCF, known for marketing “mini-bonds” to investors, amassed over £237 million before its collapse in 2019.
Presently, the company’s administrators are litigating against seven individuals linked with the defunct enterprise and two corporate entities for fraud. Legal representatives for the administrators have accused the collapsed firm of operating akin to a Ponzi scheme.
Apart from utilizing investors’ funds for advertising endeavours to attract additional support, the defendants purportedly splurged on memberships to exclusive clubs such as London’s Annabel’s, Rolex timepieces, firearms, and luxury automobiles, as revealed in court proceedings.
The Financial Conduct Authority (FCA) has levelled accusations against LCF for luring susceptible savers into “investing in unsuitable, high-risk products.” Michael Thomson, LCF’s former CEO, received a suspended 10-month prison sentence for contempt amidst an investigation by the Serious Fraud Office.
Last week at the High Court, Stephen Robins KC, representing the claimants, disclosed that a marketing firm named Surge Financial, the defendant in this case, devised promotional campaigns for LCF and disbursed millions to Google for advertisements. Surge Financial garnered commissions from investors purchasing LCF’s offerings.
Founded by defendant Paul Careless, the Brighton-based marketing company purportedly crafted deceptive comparison websites that enticed investors to engage with LCF’s products. Numerous such ostensibly independent sites would surface in Google searches targeting relevant keywords to lure investments.
LCF’s high-risk mini-bonds were marketed alongside seemingly safer products, yet offered significantly higher interest rates designed to entice consumers.
During proceedings at the High Court, Mr. Robins disclosed that Mr. Careless had communicated with colleagues via email, stating, “we spent over £20 million with Google,” which, including VAT, amounted to £24 million. Another internal email estimated the expenditure at £16.3 million.
Transcripts from the case were made public by the open justice blog Mouse In The Court.
In the claimant’s initial submissions, Mr. Robins emphasized that Surge’s “largest expense” was the cost of advertising on Google. He noted that the precise amount spent remained a “shifting figure,” and the claimants had not yet obtained a “definitive answer” regarding Google’s earnings.
Andrea Hall, spokesperson for the LCF Bondholders Action Group, expressed that victims of the scandal felt “ignored and let down by Google.” She emphasized that victims anticipated the repayment of the millions.
Ms. Hall contended that “Google provided the mechanism” for the alleged fraud, and therefore, victims should anticipate the repayment of the funds.
She remarked, “Google allowed its search and ad networks to become a tangled web of counterfeit comparison sites intended to befuddle and potentially deceive consumers.”
Google is not implicated in the lawsuit. However, the company has faced prolonged criticism for not taking sufficient measures to vet financial advertisers on its search engine, with LCF highlighted as a significant example of this shortcoming.
In 2020, Google introduced a requirement for advertisers to authenticate their identity, and in 2021, it reinforced its regulations on financial advertising to ensure that companies promoting specific products verify their regulation by the FCA.
A spokesperson emphasized, “Protecting individuals when they search for financial products and services is paramount.” They further stated that Google maintains “stringent guidelines” concerning the promotion of financial products, removing 198 million adverts that contravened its financial services regulations in 2022.
The defendants dispute any wrongdoing. Lawyers representing both Mr. Thomson and Mr. Careless assert that their clients reject “each and every allegation” against them and contend that LCF operated as a lawful enterprise. Mr. Careless declined to provide a comment.
They maintain that the payments received by Surge for advertising were “lawful and legitimate,” and that the company was not involved in LCF’s lending activities.
The legal proceedings are ongoing.
