FCA Criticised Over 79th Group Ponzi Warning

A Ponzi scheme is a type of pyramid scam, where money paid into the scheme is never invested as intended, usually ending up in the hands of fraudsters. Some money from new investors might be used to pay back earlier investors, making them believe their investment is rising in value and they are being paid the promised returns. However, pyramid schemes inevitably fail when no more new funds are added or if investors want to cash out their investment.

The 79^th Group made headline news in February 2025, when the City of London Police arrested four people associated with the business, seized assets, and began a criminal investigation.

The police alleged that the 79^th Group was “offering loan notes to investors with a high interest return over a fixed period”. The company went into administration in April 2025, leaving thousands of loan note investors wondering if they would get their money back.

Loan notes (also called mini bonds) are essentially debt agreements where the issuer commits to repaying a principal, plus interest, by a set date. They are commonly used to raise capital for business projects which, in the case of the 79^th Group, were luxury property developments, including a holiday park in North Wales. An investment project’s success is vital for the business to repay the loan and ensure the ‘guaranteed’ returns for investors.

Mini bonds are therefore not suitable for everyday investors as they carry high risk. They are intended only for ‘sophisticated’ investors or high-net-worth individuals. As a result, the FCA banned the mass marketing of mini bonds in 2020 and does not regulate mini bonds.

The Times article states that warnings had been given to the FCA, including its Chief Executive, four months before 79th Group’s failure. It is reported that the individual who complained was advised by the FCA that 79th Group “lies outside our remit” as it “does not regulate mini bonds”.

In response to criticisms that it could have done more, the FCA said:
“We have sympathy with those who’ve lost money. As there is an ongoing police investigation, we are limited in what we can say.”

The FCA spokesman added that whilst the City watchdog was co-operating with the police investigation into 79^th Group, “The firm is not authorised by us and the sale of these products was not regulated by us.”

It is reported that the individual who gave the early warnings about 79th Group told The Times that:
“The FCA completely ignored the substance of my concerns last year. Sadly, my concerns have proved well-placed and enormous amounts of investors’ money is at risk following 79th Group’s collapse.

“If the FCA is warned about a major Ponzi scheme and does nothing, is it a lapse in judgment or evidence of a callous attitude towards protecting the public?”

Around 3,700 investors are affected, and over £200 million is owed. The 79^th Group’s assets have been frozen, meaning investors cannot access their money. With an ongoing police investigation and administration (insolvency) process, this is unlikely to change in the short term.

Given the impact on investors’ life savings, the issue has been highlighted in parliament by MPs including Sir John Whittingdale and Anna Sabine.

In terms of possible redress, investors may be able to make an APP Fraud claim through the Financial Ombudsman Service (FOS). FOS is a government-backed organisation established over 20 years ago to settle disputes between financial institutions and their customers.

Authorised Push Payment Fraud, often called APP fraud, happens when victims unwittingly transfer money via online or telephone banking to a fraudster. In the case of a mini bond investment like that offered by the 79^th Group, investors believe that the investment is genuine, and their money will be used to purchase loan notes.

APP fraud is so-called because the victim ‘authorises’ the payment themselves, usually via the Faster Payments System, which enables near-instant online or telephone banking transfers for under £100,000.

It is not until some time afterwards, often months or years in the case of investment fraud, that investors realise they have been duped. By then, the fraudsters have likely transferred the money elsewhere, usually overseas, or used it to fund a lavish lifestyle rather than invest it as promised. This makes recovering the money extremely difficult and leaves investors wondering where to turn next.

Sarah Spruce, Legal Director at TLW Solicitors, says:

“Seventy Ninth Group investors will no doubt be concerned about how long the police investigation could take and where they can turn to for help with claiming compensation. This recently reported public criticism of the financial regulator is unlikely to allay their fears.

“I would encourage anyone who has lost out due to investing with 79^th Group to contact my team. We are speaking to many investors to help assess their options, including potential claims related to financial mis-selling or professional negligence.”