Disqualified director and bankrupt Terry Freeman conned more than 700 investors into joining his fraudulent scheme

This article is more than 9 years old

This article is more than 9 years old

A fraudster dubbed a "British Madoff" pleaded guilty today to a Ponzi scheme fraud that cost investors £14m.

Terry Freeman, 62, of Buckhurst Hill in Essex, admitted fraudulent trading, engaging in business while bankrupt, acting as a director when bankrupt and acting in contravention of a disqualification order.

Freeman lured 700 investors into his scheme, which collapsed after a last-ditch attempt to recoup its losses by betting on a US bailout of Lehman Brothers.

Investors included golfer Colin Montgomerie's ex-wife Eimear, who has said she invested a small amount with Freeman's company, GFX Capital. One couple invested £1.4m, were told that it had risen to £2.7m, only to later find just £14,000 in their trading account. The City of London police, who uncovered the fraud, said that the couple were now living in rented accommodation "in a state of despair".

Freeman promised investors no risk and high returns from foreign exchange investments. But in fact he was paying off earlier investors with new cash coming through the door, and also spending their money on holiday homes in Cyprus and France, an executive box at Tottenham Hotspur FC, a £120,000 diamond ring for his new bride and expensive City offices.

After the Lehman Brothers collapse investors finally became suspicious and started demanding their money back. Freeman himself went to the Metropolitan police in February 2009, complaining that investors were threatening him and admitting he had lost £20m. He was arrested days later. Police said he was trying to draw in new investors even as the operation crumbled around him.

Freeman was disqualified from being a director as a result of an earlier conviction: he was jailed in 1997 for four and a half years after being found guilty of eight offences relating to bankruptcy and being a disqualified director.

He changed his name from Terrence Sparks on leaving jail in 2000. Using a Saxo Bank trading platform, he attracted investors to GFX with the offer of high returns on short-term trades.

Statements would be issued reporting profits based on a growth figure provided by Freeman, and then entered onto an investor's spreadsheet by office staff.

One mortgage broker handed up to 100 clients and £3.5m to Freeman, before finally realising the true nature of the GFX operation, police said.

"Even after being caught Freeman was still trying to blame anyone but himself," said Detective Superintendent Bob Wishart, from the City of London police's Economic Crime Directorate.

"It was only after a long and painstaking investigation that he finally admitted to the huge amount of personal and financial damage he has caused."

It was unclear what the Financial Services Authority's role had been in the case. Investors will not get compensation from the Financial Services Compensation Scheme because Freeman was conducting unauthorised business. Reports suggested, however, that the FSA was gathering evidence on Freeman before investors blew the whistle. The regulator declined to comment yesterday saying the matter was "ongoing".

Freeman will be sentenced on 14 February.