A multi-count indictment has been unsealed in a federal court in Brooklyn against Beaufort Securities Ltd, the London brokerage firm whose operations the Financial Conduct Authority has just suspended.

The FCA declared the firm insolvent and appointed PwC as administrators a few days ago. The US charges include conspiracy to commit securities fraud and money laundering conspiracy.

The US Attorney for the Eastern District of New York alleges that Beaufort Securities, Beaufort Management Services of Mauritius and many other defendants engaged in an elaborate and long-term operation to defraud the investing public of millions of dollars through deceitful and manipulative stock trading and then tried to launder the proceeds of their frauds through offshore bank accounts and the art world, the latter because they believed it to be free from direct regulation.

The mystery shopper

The prosecutors are alleging that Beaufort Securities, Beaufort Management and others hatched a plot to defraud investors (existing and potential) in various US publicly traded companies by concealing the true ownership of those companies and manipulating their prices and share trading volumes. This allegedly took place between March 2014 and February 2018.

In 2016, an agent from the Federal Bureau of Investigation contacted a Beaufort manager in London called Peter Kyriacou and proclaimed an interest in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals.

Having accepted this as a good idea, the Beaufort crowd allegedly opened brokerage accounts for their clients in the names of offshore shell companies with nominee shareholders and directors. According to the prosecutors, they then traded in the shares of companies listed on US over-the-counter exchanges in a manipulative way. The indictment says that Beaufort Securities facilitated at least ten “pump and dump” schemes involving these shares, generating more than $50 million in proceeds for its clients. Around the same time, rather ironically, Beaufort Securities had assured the UK's Financial Conduct Authority that it had taken remedial measures to correct deficiencies in its financial crime controls and anti-money laundering processes.

Additionally, between January 2011 and February 2018, the Beaufort ensemble (consisting of Loyal Bank, an offshore bank with offices in Budapest and St Vincent and the Grenadines; Loyal Agency, a manco in St Vincent; Adrian Baron, the chief business officer of the former and a director of the latter; Linda Bullock, the CEO of Loyal Bank and a director of Loyal Agency; and others) allegedly started to wash the proceeds of securities frauds for their clients. Beaufort Securities allegedly helped by transferring funds to corporate bank accounts at Loyal Bank that it had opened in the names of offshore shell companies that its clients controlled. Loyal Bank then allegedly gave its clients debit cards to allow them to withdraw funds from those accounts in an untraceable manner.

Art and craft

On the separate subject of the art laundry, the Americans are alleging that between October 2017 and February 2018 the 26-year-old Kyriacou, his uncle Aristos Aristodemou, 49, and Matthew Green, 50, the owner of an art gallery in London, agreed to wash £6.7 million (US$9 million) which the undercover agent told them was the proceeds of securities fraud. After initially proposing the use of real-estate investments to launder the funds, the suspects allegedly devised a scheme to “clean up the money” through the purchase and subsequent sale of art. Aristodemou described the art business as the “only market that is unregulated” and said that art was a profitable investment because of money laundering. The defendants proposed that the agent could purchase a painting by Pablo Picasso entitled “Personnages, Painted 11 April 1965” from Green and provided paperwork for the painting’s purchase. The alleged money laundering scheme was halted before the event.