Barclays could face liability of up to £37m after a judge refused to throw out claims linked to a collapsed investment scheme that defrauded hundreds of retail investors.
The FTSE 100 bank provided banking services to a Liverpool-based company called Denaro from 2013 until its collapse a decade later, by which point it faced more than £90m of claims from creditors.
Denaro was founded by an IT worker, a car mechanic, and a carpet salesman, none of whom had any background in finance, according to court documents.
The founders persuaded local people to hand over thousands of pounds each as so-called loans, promising a three per cent monthly return on their money.
Liquidators allege that investor funds were moved through a Barclays company account into a separate partnership account, also held at Barclays, from which the founders “took very substantial sums for themselves.”
Some of the cash was funnelled into other speculative investment vehicles, several of which later turned out to be Ponzi schemes that the founders themselves fell victim to, in a remarkable twist.
The remainder was cycled back into the company account to fund interest payments to existing investors, a process only sustained by recruiting new investors — a hallmark of Ponzi scheme structures.
Lawyers acting for liquidators Begbies Traynor argued in court that “the Ponzi scheme could not have been operated but for the banking facilities provided by Barclays.”
The legal team accused Barclays relationship manager Andrew Wileman, who oversaw both accounts and remains a bank employee, of having “dishonestly assisted the directors in their alleged breaches of fiduciary duty” by approving tens of millions of pounds in transfers without raising concerns.
In evidence submitted to court, Wileman told Barclays colleagues in 2020 that the founders “are and have always been very transparent with me,” and proceeded to endorse what lawyers described as “a wholly misleading picture of Denaro, as a ‘members’ club’ that carries out ’99 per cent FX speculation’ and that returns funds to shareholders.”
Wileman’s assurances reportedly led a risk assessment colleague to conclude the bank was “comfortable [with] that from a risk perspective due to the fact that they no longer allow new members.”
Barclays’ legal team sought to have the case dismissed, arguing that Wileman did not act to shield Denaro from scrutiny, but a judge last week ruled the matter must proceed to trial.
Nearly 1,000 investors poured money into the scheme, which at its peak held assets in excess of £41m, according to Companies House filings.
Many victims have turned to social media to express their anger, with one person describing themselves as an investor writing: “One thing I can say for sure, had Barclays not been a part of this sh*tshow I would have stayed well clear.”
The scheme stopped accepting new investors in 2019 and was ordered to wind down last year, leaving hundreds of creditors severely out of pocket.
Barclays declined to comment on the proceedings, and a Denaro director did not respond to a request for comment.