A financial watchdog has ruled that investors who lost money when the jeweller Vashi collapsed can receive compensation under an anti-fraud scheme.
The company folded in April 2023 with debts of £170 million, and investors, many from the Middle East, believed its diamond stock would be used to reimburse them if the company failed. But when the safes were examined, the stock was worth £114,000.
Its founder, Vashi Dominguez, vanished as his UK firm was wound up, and an investigation by The National revealed he was able to raise millions to fuel his global ambitions using the diamond stock and inflated sales figures.
Some investors have been seeking compensation under the authorised push payment (APP) scam reimbursement scheme that was operated by banks at the time. The UK’s Financial Ombudsman Service (FOS) initially rejected a claim by a group of investors that banks were not liable for losses in Vashi under APP
But it has now overturned its decision regarding the claim of a couple for around £100,000 ($132,000). In his ruling, the Financial Ombudsman, Stephen Dickie, said that Vashi’s “supposed business model was simply a falsehood and that it was most likely a deliberate fraud”.
The decision now clears the way for the couple, referred to as Mr and Mrs C, to get their money back from their bank, NatWest. Millions of pounds could also be returned to other investors under the APP scheme.
In his ruling, Mr Dickie said neither Mr and Mrs C nor NatWest could have known that Vashi was a “fraud” and a “facade” overstating the value of its accounts and diamond stocks. Given the bank’s obligations under the APP scams code, NatWest should have done more, especially when two payments totalling £50,000 were sent to Vashi from the couple’s account in the space of 24 hours.
“NatWest ought to have been on the lookout for out-of-character and unusual transactions and other indications that its customer might be at risk of financial harm from fraud,” said Mr Dickie.
Michael Moszynski was among a group of Vashi investors urging the FOS to reconsider its initial ruling, made at the beginning of this year. He told The National he welcomed the new decision.
“This is what we've been fighting for,” he said. “The amount of detail we presented meant that we put them in a position where they couldn't continue not upholding our complaints against the banks.”
Stuart McFadden, co-founder of fraud-recovery experts Refundee, has been pursuing claims on behalf of investors, including Mr and Mrs C as well as those from overseas.
“This is a significant outcome for investors who were wrongly denied reimbursement,” he told The National. “While this was a sophisticated scam in its delivery, once it collapsed it was clear that investors had been defrauded. We believed the evidence was clear and continued to fight on their behalf, and we’re pleased the FOS has now found NatWest should have done more to stop these payments.”
An FOS representative said it would not comment on individual complaints but “allegations of large-scale investment fraud are among the most complex cases we deal with”.
“They can involve thousands of pages of evidence, investigations by multiple agencies including the police and regulators, and a picture that constantly evolves,” said the representative. “Ultimately, it’s not our role to prosecute fraud; it’s to decide if a bank should be held liable for an investor’s losses.”
The Metropolitan Police complex fraud team has launched an investigation, called Operation Palisade, into the collapse of Vashi. NatWest has been approached for comment.