Watchdog Rules Vashi Investors May Recoup Losses Through Anti-Fraud Scheme

Investors who lost significant sums when the jeweller Vashi collapsed in April 2023 may now be eligible for compensation. A ruling by the UK’s Financial Ombudsman Service (FOS) has indicated that these investors can seek reimbursement under an anti-fraud scheme.

Vashi folded with debts amounting to £170 million. Many investors, particularly from the Middle East, had anticipated that the company's diamond stock would be used to cover their losses. However, an examination revealed the stock was only worth £114,000. The company's founder, Vashi Dominguez, disappeared as the UK firm was being wound up. An investigation by The National previously detailed how Dominguez allegedly raised millions for his global ventures by misrepresenting the value of diamond stock and inflating sales figures.

Some affected investors have pursued compensation through the authorised push payment (APP) scam reimbursement scheme, which was managed by banks at the time. Initially, the FOS rejected a claim from a group of investors arguing that banks were not liable for Vashi-related losses under the APP scheme. However, the FOS has now reversed its decision concerning a claim by a couple seeking approximately £100,000 ($132,000).

In his ruling, Financial Ombudsman Stephen Dickie stated that Vashi’s “supposed business model was simply a falsehood and that it was most likely a deliberate fraud”. This decision paves the way for the couple, identified as Mr and Mrs C, to recover their funds from their bank, NatWest. The ruling suggests that millions of pounds could potentially be returned to other investors via the APP scheme.

Mr Dickie noted that neither Mr and Mrs C nor NatWest could have been aware that Vashi was a “fraud” and a “facade” that misrepresented its account and diamond stock values. Nevertheless, he concluded that NatWest should have taken further action under its obligations within the APP scams code, especially given that two payments totalling £50,000 were transferred from the couple's account to Vashi within a 24-hour period.

“I think NatWest ought to have been on the look-out for out-of-character and unusual transactions and other indications that its customer might be at risk of financial harm from fraud,” Mr Dickie commented. The ruling was welcomed by Michael Moszynski, one of the Vashi investors who had been advocating for the FOS to reconsider its initial decision. He told The National, “This is what we've been fighting for. The amount of detail we presented meant that we put them in a position where they couldn't continue not upholding our complaints against the banks.”

Stuart McFadden, co-founder of fraud-recovery specialists Refundee, which has been representing investors including Mr and Mrs C and overseas clients, stated, “This is a significant outcome for investors who were wrongly denied reimbursement. While this was a sophisticated scam in its delivery, once it collapsed it was clear that investors had been defrauded. We believed the evidence was clear and continued to fight on their behalf, and we’re pleased the FOS has now found NatWest should have done more to stop these payments.”

An FOS representative acknowledged that allegations of large-scale investment fraud are among the most complex cases handled, often involving extensive evidence and evolving investigations by multiple agencies. The representative clarified that the FOS's role is to determine bank liability for investor losses, not to prosecute fraud.

The Metropolitan Police's complex fraud team is investigating the collapse of Vashi under an operation named Operation Palisade. NatWest has been contacted for comment.