Great frauds in history: Kautilya Pruthi’s Ponzi scheme

Kautilya Nandan Pruthi was born in India in 1970 and moved to the UK at the age of 15. In 2005 he set up a company, Business Consulting International, with his associates Kenneth Peacock and John Anderson. Taking advantage of Peacock’s membership of Surrey County Cricket Club, the trio persuaded a large number of clients, including cricketer Darren Gough and actor Jerome Flynn, to hand over money, claiming they could make returns of up to 13% a month by lending at high rates to businesses unable to borrow from banks.

What was the scam?

Instead of lending the money, Pruthi used the funds he received from investors to support an extravagant lifestyle – among his assets were 16 luxury sports cars, including two Ferraris, a Lamborghini and several Bentleys. He rented a mansion for £20,000 a month and bought a Cessna Citation private jet (which crashed in 2008). To repay investors, he used funds taken from new clients – in other words, he ran a classic Ponzi scheme – although many early investors chose to reinvest rather than withdraw their funds.

What happened next?

In 2008 the then Financial Services Authority (FSA), the City regulator, decided to intervene, securing a court order to freeze assets. After fully investigating the scheme, the City of London police arrested Pruthi and his two associates. Despite this, many of Pruthi’s investors refused to believe the scheme was a scam, and even attempted to sue the authorities. In 2012 Pruthi was convicted of fraud and sentenced to 14 years in prison; Peacock and Anderson were convicted of more minor offences and given 18 months.

Lessons for investors

At the time that Business Consulting International’s assets were frozen, it claimed to have £114.7m in assets. Unfortunately, even after seizing the firm’s assets, the FSA was only able to recover a total of £800,000, which meant that most investors only received a fraction of the money that they had put in. Investors would have been better advised to follow the example of cricketer Kevin Pietersen, who turned down an opportunity to invest in the scheme because “it seemed too good to be true”. A rule of thumb is that if this seems to be the case, it really is too good to be true. Another lesson to be learnt, noted by MoneyWeek at the time of Pruthi’s sentencing, is to “never trust a man in a cravat”.