Promises of generous returns on backing novel products can be awfully tempting for investors, but such investments should only be undertaken with the benefit of professional advice. In one case that underlined the point, the creator of a weight-loss drink defrauded investors and friends out of £580,000 in a futile attempt to keep his business afloat.
The man had held a series of high-level management roles in the past and gave all the appearance of honesty. He had himself invested heavily in his drinks business but resorted to deceit when failure was staring him in the face. Amongst extravagant and false claims that he made to investors were that the Prince of Wales Trust intended to invest in his product and that Sainsbury’s had agreed to stock it.
As his business descended into dire straits, he managed to extract £400,000 from professional lenders and also defrauded his friends, one of whom put £100,000 into the venture, the only capital that she had. It transpired that he had kept significant amounts of the money for his own purposes. The investors lost everything.
He ultimately admitted eight counts of fraud and was jailed for six years and three months. In challenging that sentence before the Court of Appeal, his lawyers said that he had been desperate and that the business had not been fraudulent from the outset. The convictions were a considerable fall from grace for a man who had previously led a blameless life. The Court, however, was unpersuaded that the sentence was manifestly excessive and dismissed the appeal.
Source: News – Investment Opportunity? Take Advice First