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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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”.
-
What is the 25% pension tax-free cash - and when should you take it?The 25% tax-free cash that savers can take from their pension pots got plenty of airtime in the run-up to the Autumn Budget, with speculation that it could be cut or axed. But, what is it and how does it work?
-
Pension warning: one in five don’t know how much is going into their pensionHow to check your pension contributions and why it matters
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK wage growth hits a record highStubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
