An interesting story that remained mostly under the radar a couple of weeks ago is, for the most part, still a mystery today. The question is what happened to a UK currency trader named Joe Lewis and – just as important – what happened to up to £130 million in investors’ money that was under his responsibility? By press accounts, it sounds like a Ponzi scheme similar to Bernard Madoff’s case has been underway in Britain for at least 5 years. If the allegations are correct, Lewis’s investors should be extremely concerned.
Ponzi schemes are a simple concept: Money from new investors is used to pay off existing investors, creating the illusion that the fund is earning money. Over time, more new money is needed to keep paying off on fictitious gains and keep the Ponzi afloat. Eventually, the pool of new investors – and the money – runs out, and the pyramid falls apart. Such schemes are illegal in the developed world, including (of course) the UK.
When Madoff was exposed, he owed billions in fake earnings to investors who had been taken on a nearly 10 year ride – many of whom saw their life savings evaporate. It is feared that Lewis orchestrated a similar scheme, and that he admitted as much in a recent email to clients. As reported in the Telegraph:
In an email sent to clients a fortnight ago, Mr Lewis admitted that his company, JL Trading, had stopped operating in 2009 after suffering heavy losses on disastrous foreign exchange deals.
He confessed in the email that he had continued taking people’s money for the next five years in an attempt to turn his fortunes around, but that all those attempts had failed.
In an email sent a month earlier – in response to growing concern from investors trying to get their money out – he claimed that his company was having “a stressful time” releasing $197 million (£126 million) from American brokers because of US red tape.
It is discouraging to think that several years after Madoff’s shocking scheme was exposed, other Ponzi schemes are still operating with impunity, without detection – at least until the money has simply dried up. Lewis has disappeared, by the way. According to the article, he has not been seen at his apartment for weeks and is not responding to emails or phone calls. It is unclear as to whether there is a legal action against him at this point. But it stands to reason that, if the allegations are correct, he will soon be a wanted man.
Sadly, it is doubtful that much of his investors’ money remains to be recovered.