LONDON (Reuters) - A British court on Tuesday found a man guilty of defrauding thousands of investors out of 34 million pounds through a series of pyramid scams.
Kevin Foster, 51, who promoted his “KF Concept” collection of schemes by holding lively roadshows at hotels across Britain, used investors’ funds to maintain a lavish lifestyle for his family, buying a 600,000 pound farm and fitting it with a swimming pool, hot tub and exotic animals.
He also spent more than 700,000 pounds on cars and withdrew almost 3 million pounds in cash during the course of the schemes, Harrow Crown Court heard during the seven-week trial.
Claiming the scheme made its money from gambling wins and network marketing, Foster told investors he was making 28.50 pounds from every 1 pound invested.
But Foster consistently lost at gambling, the Serious Fraud Office said in a statement, losing more than a million pounds in total. His largest scheme “Planline,” into which 12 million pounds was paid, only returned 1,703 pounds.
Pyramid schemes operate by the initiator recruiting investors, who in turn recruit investors, who also recruit investors and so on.
The pyramid works so long as fresh people can be found to join the scheme and who can generate the cash to pay the dividends for those who joined earlier.
Foster started his first scheme in 2001, recruiting money from his colleagues for a share in a football betting scheme and encouraging participants to roll over their winnings and invest further in his next scheme.
“The operation grew more elaborate with each new scheme,” the Serious Fraud Office said in a statement.
“Throughout it all, Foster maintained a high profile through the media, road shows, charitable donations, and sponsoring local teams and sportsmen. However, his conduct was dishonest from the start.”
By the time Foster’s scheme was stopped by the Financial Services Authority in 2004, about 8,500 participants had invested a total of 34 million pounds with him.
He would have needed to generate more than 250 million pounds to meet the accumulating expectations, the SFO said.
Reporting by Kylie MacLellan; Editing by Matthew Jones