One of the directors of Collateral admitted administrators paid him a sum intended for staff wages and he kept it as a “part payment” of what he was owed by the company, a court heard.
Andrew Currie, 57, accused of having the company pay out over £370,000 to him before it was forcibly closed, said he grew frustrated over not being paid.
Southwark Crown Court heard Collateral was making £20,000 a day and he alleges any payment made to him just before the FCA shut the company down was a part of it.
He also slammed the trial and the FCA for not calling the company’s legal advisor, Richard Tall, as a witness, as he believes there has been a “deflection of blame“.
In an earlier hearing, jurors were told Mr Tall said to the brothers after it was discovered the company was not regulated by the FCA after they professed it to be they would have to be “18 years old” for people to assume what they had done was a mistake.
Collateral (UK) Limited was a finance company which facilitated investments crowdfunded by members of the public. The firm and two related companies entered administration in April 2018.
The two defendants, Andrew Currie, 57, and Peter Currie, 59, both deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002 in this criminal prosecution brought by the Financial Conduct Authority.
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Contemporaneous reporting by Joe Morgan who tweets @nottherealjoe
SARAH GAYTON
Barrister Henry Grunwald OBE KC, for Andrew Currie, continued the brother’s evidence by asking about his relationship with Sarah Louise Gayton, 42.
Her company, Auri Developments Limited, benefited from £275,000 before Collateral went into administration, which prosecutors say forms part of the second count of fraud.
The particulars of the charge state the brothers “abused their positions, in which they were expected to safeguard, and not against, the financial interests of the company by transferring £275,000 from Collateral to Auri Developments Ltd.”
Grunwald: “When did you first meet her?”
Andrew: “Sarah and I started in a relationship in late 2015. I introduced her to aspects of property, such as how lucrative it can be for planning gain and taking properties from where they previously had lapsed planning and increasing value.
“Sarah was a very capable person and very driven and the opportunities were there in the world I was working in and it was always good to have an extra pair of hands and eyes to find opportunities.”
Grunwald: “The company AURI Developments had been incorporated on November 2016 and Sarah Gayton was the sole director. Now you’ve told us you and Sarah were in a relationship and we know from documents you were living at the same address. Did you play a role in the running of Auri Developments?”
Andrew: “No.”
Grunwald: “You had no formal role but was it something that you discussed with her?”
Andrew: “I would discuss and advise when relevant.”
The defence barrister then walked the jury through one particular property, 10-26 Kemp Street, Fleetwood in Lancashire. The plan was to convert it to a 75-unit building, with build costs of £2.4 million and selling for £6 million. Its original cost was £500,000.
The court heard Collateral paid the first tranche, £275,000, to Auri Developments, with the second tranche, £225,000, to be paid on completion.
The property eventually was sold to ND Holdings Ltd, a company also belonging to Ms Gayton.
Jurors were told by Currie that as the second tranche was not paid by Collateral, it was a breach of contract and she could walk away.
Grunwald: “Did you benefit in any way from what Auri Developments did from this transaction?”
Andrew: “No. In hindsight, it detrimented myself. The relationship with Sarah Gayton…we’re on speaking terms [now] but not in a relationship.”
The court was also told Currie’s bank accounts were frozen after he failed to enter tax returns in 2018.
Andrew Currie said: “It was catastrophic. I had no access to any funds whatsoever. It just disables everything you’re doing.
“I couldn’t submit returns because I was totally unsure whether the funds were classed as mine or not my funds.”
Mr Grunwald closed the evidence by reiterating Andrew Currie’s denial of the charges and said:
Grunwald: “Were you acting with the intention of defrauding anyone, as set out in the indictment?”
Andrew: “No.”
Grunwald: “Did you have the intention of misleading anybody?”
Andrew: “No.”
‘A SHIP WITHOUT A CAPTAIN’
Peter Currie’s representative, Colin Aylott KC, began his cross-examination by asking about the period after the FCA letter informing Collateral that it had discovered they were not regulated while on the website it said otherwise.
He said the former director of Collateral was in a “bad place” mentally and that his brother Andrew returned as director to ‘steady the ship’.
Aylott: “You must have thought things were pretty bad because you decided to come back as a director. What was in your mind the assumptions of duties of a director after you had been appointed again?”
Andrew: “There was a big responsibility to the existing investors and borrowers, equally, that I took seriously. A ship without a captain still needs someone to sail it.
“His mind was completely confused due to the [conflicting] advice he was receiving.”
Mr Aylott then outlined the more than £370,000 paid to Andrew Currie between 13 February and 26 February.
He said: “What I want you to think carefully about is if you would, looking back with the benefit of hindsight five years on do you accept that you placed your brother at the time these payments were made to you under a significant amount of pressure?”
Andrew: “No different pressure than the normal operating course of Collateral.”
Aylott: “You told the jury that you had been…demanding your money for a number of weeks and months prior to February 2018. Is that correct?”
Andrew: “Yes.”
Aylott: “You said to us previously you’d introduced significant business to Collateral. You had agreements and…you expected that agreement to be honoured. Is that right?”
Andrew: “Yes.”
Aylott: “February 2018 was not the first time by any stretch of the imagination you had asked for payment. Is that right?”
Andrew: “Yes.”
Aylott: “Looking at what happened at the end of January, looking at the pressure Peter Currie you accept was under, do you accept you placed him under severe pressure to pay up the money that was owed to you?”
Andrew: “No, I don’t accept that.”
Aylott: “I’m going to suggest to you that there’s no dispute you were owed the money following the deals you introduced to the company but what I’m suggesting is that you mentioned that all the other creditors were being paid. You referred to Peter Currie in the storm of it all was looking to ensure many of the people who had supplied to the business, the IT, stationary, and so on, were paid that money and that was a priority. Did you think you weren’t being prioritised?”
Andrew: “Absolutely.”
Aylott: “Considering you thought you didn’t think you were being prioritised, what did you think [to say to your brother]?”
Andrew: “I didn’t see the logic. I saw [Collateral] making £19,000, £20,000 a day. I found it difficult to see why I wasn’t being paid.”
Aylott: “This is at a time you accepted in your evidence that because of the FCA letter you thought things were going to change for the business. Is that right?”
Andrew: “I thought [it was going to change] for the better.”
Aylott: “You wanted to go unregulated. That was always your desire. Peter wanted to go regulated. What I’m going to suggest to you is you were pretty relentless in the pursuit of this money as you saw other money being paid out.”
Andrew: “No.”
Aylott: “You were, by some margin, the one who was owed the most money.”
Andrew: “I was the one that brought business into Collateral.”
Aylott: “With the benefit of hindsight, do you think perhaps that your demand – however you made that demand – at that time was the right decision?”
Andrew: “Peter’s my older brother. He wouldn’t accept demands from me.”
STAFF WAGES
Part of Currie’s evidence jurors heard was going into administration was the hope of “steadying the ship”, to restructure Collateral and avoid liquidation.
The court heard Andrew Currie was the “point of contact” for Refresh Recovery, the administrator appointed by Collateral, and that he was originally paid £28,000 to carry on the company for six months to wind down the loan book.
But he also received £40,000, intended for staff wages, and jurors were told he did not return this once it became evident the company would be shut down.
Aylott: “There was a discussion over the £40,000 for the staff wages. Was that a discussion on the premise that the company would still function?”
Andrew: “That’s right.”
The former director said Gordon Craig, which he said in yesterday’s hearing was a Facebook friend who met at a football match, who managed Refresh Recovery, made the instruction to give £40,000 to him for the wages rather than it being managed by the administrator which typically takes over the bank accounts.
He was also asked about £20,000 he paid to Peter Currie shortly afterwards, which he claimed yesterday had been to split the staff wage sum up as they were both directors.
Andrew: “I made an error on this yesterday. I think I said that I thought it was payments for the staff to work through the winddown window but it actually wasn’t, it was a payment that I owed Peter personally…it was a payment I owed him for furniture of one of my properties.”
Aylott: “It would appear on the face of it that this £40,000 represents the wages. It wasn’t for you, was it?”
Andrew: “No it was for staff.”
Aylott: “We know that other payments were made to you, the £28,000, that has been documented elsewhere and the jury have seen it, that was paid to you for the role you were going to do for the loan book winddown. Bear in mind you didn’t wind down the loan book, you didn’t carry out the work, didn’t you think to pay the money back?”
Andrew: “I didn’t, to be honest.”
Aylott: “But you didn’t do the work associated with the £28,000. What about that money?”
Andrew: “I would have treated it as another part payment… I probably treated it as a payment that was outstanding to me.”
Aylott: “This money was paid to you for a specific purpose, and once you realised that it was not going to happen, didn’t you think about it going back to Refresh?”
Andrew: “No, I didn’t.”
A ‘GREAT DEAL’ FOR COLLATERAL
Mr Aylott then went into the deal with Auri Developments, suggesting that Peter Currie was shut out of the money that Andrew Currie’s girlfriend was making.
Aylott: “Can you help us with this, bearing in mind that the deal has been sold to Peter Currie on the basis that Auri was buying the property, did you ever let him know that Auri didn’t buy it but ND Holdings did? This might have affected the sale agreement between Auri and Collateral. Do you not think this is something that a director should have known?”
Andrew: “I’m sure Peter knew of that.”
Aylott: “I’m going to suggest you didn’t tell him.”
Andrew: “I would have.”
Aylott: “Did it strike you as strange that instead of Auri buying this property it was ND holdings? Why didn’t Auri go through with it?”
Andrew: “It was through a third party, someone I was in a relationship at the time. I can’t answer for a third party.”
Aylott: “You’re being copied in on emails, she was your partner at the time, and surely you go home together and you talk about your days was there a discussion ever that actually I’m not buying it through Auri rather than I’m buying it through ND Holdings.”
Andrew: “It’s very typical to set up a new [company] for a new development like this.”
Aylott: “Did it strike you as wrong that in fact Auri or ND holdings, it didn’t matter who, Collateral’s money was being used to buy this property because that is what happened but it was sold back to Collateral at a huge premium even though it was Collateral’s money being used to buy it?”
Andrew: “It’s business. I bought…a property from the editor from The Guardian for £160,000 and I sold it for £550,000….the company is still getting it for way under value.”
Aylott: “I’m not saying there is anything wrong with ND holdings or Auri making a profit. They were funding the property with Collateral money, not their own money.”
Currie said he believed it to be a “great deal” for Collateral.
Andrew: “If Collateral didn’t conclude and complete then obviously ND or Auri are free to do what they want with it.”
Mr Aylott, Peter Currie’s representative, said he suggested the reason Andrew planned this was “let’s have an asset on the books that was worth a lot of money based on the figures that you’d given him and how the potential was worth millions for Collateral – that was the idea. But Collateral ended up with nothing for £275,000.”
“Collateral breached [the] contract,” Currie responded.
BUYBACKS AND BEFORE COLLATERAL
Stuart Biggs, prosecuting for the FCA, took Andrew Currie through his first businesses before he started at Collateral.
Biggs: “The thing you did was similar to pawnbroking but it wasn’t pawnbroking, because pawnbroking would have required you to get a licence. None of your entities while you were a director had such a license. The way that you were able to proceed, is this right, rather than a situation where a pawnbroker takes an item, a necklace or a watch, takes the item lends the money but the watch remains the property of the lender. You adopted a variation that the customer sells you the watch that you own it, the company owns it, you give the customer an option to buy that watch back at a certain point in time and you make a margin.”
Andrew: “It’s the same as Cash Converters or many other lenders with that same construction on the high street.”
Biggs: “You’re able to avoid being regulated, is that right?”
Andrew: “It’s not to avoid being regulated. The difference is a pawn loan benefits the borrower while the buyback benefits the lender. The pawn loan is for a period of six months so if a customer doesn’t come back for the product, you’re not getting the interest, whereas when you’ve bought the product, the customer has to come back in 30 days, 90 days etc. It’s much much more of a suitable way of making money than pawnbroking.”
Biggs: “Is it fair to say you’re always aware of what you can do without being regulated?”
Andrew: “Not an expert but on general guidance when I see it on the high street and they’re doing it, you know their contracts are generally correct.”
Biggs: “You have to find out those on the high street are regulated? You have to do some research into what you can do and the other options what you can’t do.”
He continued:
Biggs: “You told us that Peter Currie had jobs with Hewlett Packard, Department for Work and Pensions. Did you get him involved in the pawnbroking, or should I say the cash for assets industry?”
Andrew: “Peter was working as a consultant and… he saw the businesses I was operating.”
Biggs: “To be absolutely clear your position is that you weren’t doing it together, he was just copying you?“
Andrew: “I would say that he was trying to set up a similar type business.”
Biggs: “Did you help him at all?”
Andrew: “Yes I would help him.”
Biggs: “Did you have any day-to-day management responsibility in relation to any of his businesses prior to Collateral?”
Andrew: “No.”
COLLATERAL BUYBACK
The prosecutor outlined Andrew Currie’s previous companies, such as Asset Cash and Loan Broker which operated buyback schemes.
He also read the first correspondence in which the Currie brothers as directors said Collateral had been interim authorised and regulated by the FCA.
It read: “We have put all our knowledge and experience of various businesses into Collateral and have worked on the concept for a number of years. We believe that it is the best business opportunity on the market at the moment and is risk averse. Though much of what we do is unregulated, Collateral is (interim) authorised and regulated by the FCA and have engaged with a consumer credit compliance company to assist with the application for full permissions.
“To date we have over £1.5 million in loans under management and always the asset loaned against. Jewellery and smaller items are stored in safe deposit boxes.”
Biggs: “[A broker] is told that Collateral has this £1.5 million loan under management. Is this the loan book that you were essentially selling to Collateral?”
Andrew: “No.”
Biggs: “Now we go to October and there is a Collateral loan book of £2.2 million. If we look at this and at the borrower column, we’ve got a reference column which lists Collateral BB. Does that stand for Collateral Buyback?”
Andrew: “Yes.”
Biggs: “Most of it is jewellery, some are vehicles, some are property, and then it lists a name which is the name of the borrower.”
Andrew: “It’s sometimes not the name of the borrower, it’s the name of the introducer.”
Biggs: “We’ve got relatively few people named, let’s call them contracting parties – relatively few here yes?”
Andrew: “Yes.”
Biggs: “The very first one, BuyBack 0001, six assorted rings, and in named entity is Asset Cash and that’s you. So your company…had the very first loan out of Collateral.”
Andrew: “Not the very first loan but provided the assets.”
Biggs: “This was a way of laying off, passing it, so Collateral was effectively underwriting Asset Cash, was that what was happening?”
Andrew: “I’ve submitted it as Asset Cash as an introducer.”
The prosecutor took Currie through the second loan, through Mederco a company owned by Stewart Day the former Bury FC chairman, and then Mid-Cheshire Estates, which was another company owned by the defendant.
One of the assets lent against was a film called Strangeways Here We Come, starring Corrie actress Michelle Keegan – about a loan office shark, that garnered overwhelmingly negative reviews and earned less than £3,000 at the box office.
Biggs: “Was that something you brought into Collateral?”
Andrew: “It was something that I used to bring the directors into the company.”
Biggs continued: “Going up this list there are lots of references to Asset Cash, Mederco, and now we have the name Sarah Gayton, on the first page, next to a Ford Focus. On the face of it, as we have heard the vehicles on the loan book, we’ve heard about a very expensive Mercedes from one of the witnesses, was lending on a Ford Focus a bit out of the ordinary within this loan book of all this jewellery?”
Andrew: “There was a built-in [structure]…to see if there was anything adverse with the vehicle. The company was set up to lend against vehicles.”
Biggs: “There doesn’t seem to be very many on this list.”
Andrew: “It did progress later but the company was lending against motor detailers and the first default we had was a motor vehicle.”
Biggs: “The £6,000 next to Ms Gayton, a loan for her, were you in a relationship with her at this time?”
Andrew: “I think it was the start of being in a relationship with her at this time.”
‘YOU’LL NEVER SEE ME SPEAK TO JOE BLOGGS’
Biggs: “Let us go back to this first piece of correspondence telling a broker, an intermediary with lots of clients, that Collateral has interim permission.”
Andrew: “What I would say is that what the actual brochure referred to I felt comfortable with an unregulated model and it had been approved by an independent financial advisor. That model of lending I was comfortable with.”
Biggs: “But it wasn’t going to get you enough investment, was it?”
Andrew: “I could get an equity partner tomorrow for any business.”
Biggs: “The whole point of the Collateral platform is that it’s a website, so Joe Bloggs, any small-time investor not an equity partner, a small item investor who finds the website on chatrooms, finds it on Googling, finds it on peer to peer platforms.”
Andrew: “You’ll find that I’m only interested in sophisticated investors. You’ll never see me speak to Joe Bloggs or the public.”
Biggs: “Mr Currie, you and your brother spent a lot of money on Tony Lambrou [the IT consultant who built the Collateral platform].”
Andrew: “Peter did.”
Biggs: “And a lot of money you employed Gordon White to do the other side [the front design], specifically so you would have a website targeting retail investors.”
Andrew: “For Collateral, not for me personally.”
Biggs: “But you were a director of Collateral.”
Andrew: “Yes, and then I stepped down.”
Biggs: “The position is that throughout this you’re trying to distance yourself from Collateral and Regal and Auri isn’t it?”
Andrew: “I’d say, factually, from the allegations put towards me, of the 8,000 emails, can you produce one from me saying let’s do that?”
Judge Martin Griffiths then told the defendant that he is not to ask the questions.
Biggs: “You wouldn’t email your brother, would you? You would talk to him.”
The prosecutor then went through an email which referenced Andrew Currie who wanted to keep Regal Pawnbroker as a website “because of its potential via the website enquiries and potential from several London-based sources working on a lower margin”.
Currie said the email “didn’t deserve a response” because he felt the tone of the email was unprofessional.
But for that specific line, he said: “He’s got that slightly correct. The potential via website enquiries could be good because that’s the idea to get as many loan applications as possible.”
Biggs: “And Regal Pawnbroker was a business that you were running with your brother?”
Andrew: “No, that’s not correct.”
ROLE AT COLLATERAL
The prosecutor then took Currie through an email sent in July 2015 about the potential sale of Regal Pawnbroker to a man named Matthew Bonthrone.
Southwark Crown Court heard part of the sale was that it had interim permission from the FCA, and Mr Bonthrone changed the trading name to Fitzwilliam Black.
Biggs: “They show Regal Pawnbroker Ltd as it was being offered up to buyers. You’re aware a part of the sale as an entity that comes with interim permission.”
Andrew: “I think it was discussed as being sold but it didn’t crystallise.”
Biggs: “You’re copied into this because you’re involved in the sale, aren’t you?”
Andrew: “No.”
Biggs: “And you’re aware that a part of the sale is that it comes with interim permission?”
Andrew: “No, it wasn’t my company.”
The prosecutor read out an email forwarded to Andrew Currie by Peter Currie detailing the deal background by Mr Bonthrone.
It read: “Andrew and Peter sold us their pawnbroking business which we rebranded. Meanwhile they have created the Collateral peer to peer lending platform.
- A fully FCA regulated loan business
- Started with a ring and a £500 loan
- Now figures reaching the millions
- Fitzwilliam Black has produced an interesting platform for bonds
- A new partnership to build the company and its clients to prepare the company for its stock market debut.”
Andrew: “It all sounds very exciting, but I think it was all in Mr Bonthrone’s imagination really… the FCA regulated peer-to-peer lending. I wouldn’t pursue anything of that…it isn’t something I would have wanted to do… A lot of people talk like that in the City of London. I prefer to focus on actual business.”
Biggs: “This isn’t just anybody spouting nonsense this is the person in process of buying the company.”
Andrew: “He didn’t buy the company.”
The prosecutor suggested to Currie that whether it was listed or not, Regal Asset Finance, Regal Pawnbroker Ltd, and Collateral “as you and your brother together”.
Andrew: “You’re wrong. Can you show any correspondence…-”
The judge again reminded Currie to not ask questions to the prosecutor.
Biggs: “Your role in Collateral didn’t really change when you stopped being a director, did it?”
Andrew: “My practical role [didn’t change]. My role was to bring in business or the company wouldn’t have operated.”
Mr Biggs, the prosecutor for the FCA, said during the time when Andrew Currie was not a director of Collateral he behaved like a leader of the business.
He said: “You spoke to Ivan Zhiznevskii [in October 2017] and you said yesterday you were the only person to answer the phone when you were in the office. Did he believe you were a director of Collateral?”
Andrew: “I answered the phone on behalf of the company. I then gave him my mobile number and it’s the same mobile number I have today.”
Biggs: “You didn’t say to him, well, it’s really my brother’s business now and you need to deal with him about the investments?”
Andrew: “He always said he was an institutional investor so I was always comfortable with that… his choices of what he did with Collateral was down to him. I never invited him to invest in the company.”
Biggs: “His evidence was read without challenge to the jury. He wanted to know that this was regulated and he wanted to know the company had interim permission. You were his point of contact that could reassure him of that, is that correct?”
Andrew: “Yes.”
Biggs: “He wouldn’t have put his investments into the company if he was aware that Collateral was not authorised by the FCA, is that correct?”
Andrew: “I could only relay what I believed about the company. I believed it was regulated.”
The defendant added: “The attraction was for me was that he was interested in investment opportunities. That doesn’t just restrict with Collateral – there were a lot of investment opportunities to synergise with.”
Biggs: “But he was talking to Collateral, wasn’t he?”
Andrew: “That was just one aspect.”
Biggs: “He writes, ‘as agreed we have started to register our fund with your platform’. That’s with Collateral.”
Andrew: “Yes. I would only speak to people who were interested in exploring alternative routes…unregulated entities.”
The prosecutor then asked about the FCA letter sent in January 2018 that informed Collateral that it had discovered they did not have interim permission.
An earlier hearing was told it took the authority 22 months to discover that Regal Pawnbroker Ltd, which had interim permission, had been changed, to Collateral, which did not.
Andrew: “What I had read of it was that the company was not authorised by the authority. That is the reason why this case is here today, there’s been a lot of uncertainties about whether the authority had acted as it should have and that’s why I believe we are in court now as a bit of deflection of blame from the FCA in this case.”
He added: “I don’t know why [Collateral’s legal advisor] Richard Tall hasn’t been called as a witness. That is why this case is in court today.”
Andrew Currie’s cross-examination will continue next week.
Both Curries deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002
The first count of fraud alleges they dishonestly made a false representation to investors and potential investors that the company Collateral UK Limited was authorised and regulated by the Financial Conduct Authority.
The second count of fraud claims the Curries abused their positions, in which they were expected to safeguard, and not act against, the financial interests of the company by transferring £275,000 from Collateral to Auri Developments Ltd.
The third charge relates to converting criminal property, suggesting the Curries converted credits to the total value of £372,299.52 to bank accounts owned by Andrew Currie, knowing or suspecting it to be proceeds of crime, namely fraud by misrepresentation.
The trial continues next Wednesday.
Case details:
Courtroom 12 Southwark Crown Court
Before His Honour Judge Griffith
5th May 2023
Case number: T20220056
CURRIE Andrew
CURRIE Peter
The Financial Conduct Authority are represented by barrister Stuart Biggs, assisted by Thomas Coke-Smyth.
Peter Currie is represented by barrister Colin Aylott KC, assisted by Ashley Hendron.
Andrew Currie is represented by barrister Henry Grunwald OBE KC, assisted by Oliver Renton.
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