Turning Point
At the Paris Gare du Nord, Barton made his way along the quai to the high speed Thalys to Brussels; there were no passport controls or formalities, he was in the EU Shengen Zone. He showed his ticket to the controller standing at the door of the first class carriage, collected a copies of The Daily Telegraph and The Times from the rack and took his seat. A good number of seats empty, no doubt due to the crisis.
Barton’s meeting with his non-dom account manager to review his cash reserves spread between dollars and euros was fixed at eleven. It was not a big deal. He not justify forgoing the visit given his presence in Europe just over an hour from Brussels and the importance he attached to keeping personal contacts with his banks. The Belgian banking system had a little known advantage; though not as secret as that of Switzerland, it was a world removed from prying French banks slavishly attached to the France’s fiscal administration.
He settled back in his seat and opened one of the newspapers as the train pulled out of the station. There was nothing earthshaking, confirmation of the television news he had watched that same morning: HBOS had lost another ten billion, an item of seemingly little importance to readers. The public was becoming saturated with the bad news that had been making the front page for months and it was a fiery plane crash in the US that grabbed the headlines.
The Telegraph pursued its anti-EU rantings, fawning to certain of its readers' ancestral hatred of anything not British, especially all things that were French — or Irish. He turned to the financial pages where as usual reports were what they are, superficial daily page filling articles, heavy in sensation, shallow in depth.
He was about to fold up the paper when a smaller report caught his attention; a fund manager had been arrested on suspicion of money laundering and illegal trading. Barton, about to head to the bar, stopped in his tracks; the fund manager was named as Kessler. Immediately recognising the name, he sat down and started to read the article, but he was disappointed; the details were scant. He then pulled out his mobile phone and punched in Malcolm Smeaton’s number.
The prospect of a quick profit had tempted many a small investor to take irrational risks in the euphoria of the boom, at the same time it was an extraordinary occasion for predatory swindlers to make a killing. Kessler, whom Barton had first known as an accountant, then a somewhat doubtful mortgage broker, was one of these. His knowledge of finance and accounts, coupled with an exaggerated self confidence, made him an ideal white collar crook.
Kessler was the director of EFM Capital Markets, a company registered in the Cayman Islands as an online financial service for FOREX trading, stocks, futures and options designed for individual investors. It operated from an office on Aldersgate Street in the City of London and with letterbox addresses in New York and Zurich.
Using OTC on-line transactions, as traded between banks, brokers and clients via Internet, EMF’s customers bought and sold products via a professional software trading system provided by EuroForexMarkt in Zurich. They also offered commodities trading with settlement based price differences without physical delivery of the concerned commodity. These CFD transactions were operated by a system of margin deposits system. For example, the minimum trading unit of gold was one hundred ounces lots, which via a credit line only required a client to pay ten percent up front for an option, which was called margin.
Online trade for individual traders did not require a broker. The software package, ForexMarkt, provided real time market information such as bid/ask prices, buy/sell orders, news, charts and various analytical tools. All that was required was an internet account via their website with the deposit of a minimum sum of money and trading could be carried out from the trader’s home computer.
It was so simple that any aficionado could open an account from his home and make money, it was better than a betting shop. Forex trading was a twenty four hour business compared to normal markets. The twenty four hour trading day started in Sydney and allowed investors to bet on currency fluctuations resulting from events or political decisions around the clock.
EFM claimed its easy-to-use software and secure trading environment made them a leading Forex dealer. ForexMarkt took just a few seconds to download and install. They had a minimum account requirement of two thousand dollars and offered an attractive leverage ratio commencing at 200:1.
They operated through a legitimate Danish banking platform specialised in online trading in international financial markets, a facilitator in global capital markets, offering access to exchanges around the world and providing a powerful suite of software products and platforms to partners, private clients, institutions, banks and brokerages.
Its trading software system was available to brokers and financial institutions via a procedure known as ‘white labelling’, in other words it was customised and branded for other financial institutions and brokers, who legally rebrand it to make it appear as the broker made it. In the case of EFM the product was re-baptised ForexMarkt.
Barton was only partially surprised to learn that naïve small investors had put millions into Kessler’s firm, some investing up to a quarter of a million pounds each, including a couple of Smeaton’s clients. Tom Barton himself, as a City based mortgage broker, had often been asked for advice by small investors; something he had always refused, limiting his business to mortgages and property. Any intelligent investor should have seen that Kessler could not make money week in, week out, which is what his fund appeared to do.
It seemed Kessler had been living in a large two million pound home on the outskirts of Upminster in Essex for the previous two years. A police spokesman said officers investigating suspected money laundering and offences under the Financial Services and Markets Act had searched his home and large quantities of documents been seized. EFM was suspected of running a Ponzi fund that had left his investors facing substantial losses.
Governance