Lloyds call £160 million Ponzi scheme a 'legitimate investment' in refusal to reimburse victims
Although insolvency practitioners allege Godwin Capital was a Ponzi scheme, Lloyds Banking Group have called it "legitimate", saying it does not meet the criteria for mandatory financial reimbursement
Lloyds Banking Group says it will not reimburse victims of an alleged £160 million Ponzi scheme under the industry's fraud rules as it regards it as a "legitimate" investment.
Listen to this article
The bank told one investor in Godwin Capital that Lloyds "can't consider this was a scam" despite insolvency practitioners dubbing it a Ponzi scheme - a term for unlawful investment businesses using new investors money to repay liabilities to old ones, rather than legitimate commercial activity.
The decision comes after insolvency practitioners sued the directors for alleged mismanagement, fraudulent trading and breach of fiduciary duty.
Godwin Capital was a "loan notes" investment business which collapsed in 2025, with investors now only expected to recover around 5p for every £1 they put in.
Lloyds was the receiving bank for the £160 million raised from investors, with Godwin's relationship with Lloyds allegedly used by promoters - including inaccurate information about the relationship - to imply that investors' money was safe.
Read more: AI and robotics ‘critical’ for faster growth in UK economy, says Bank boss
Around £35 million of the investor's money is understood to have gone to third-party promoters, who sold the scheme to investors with "incentives" including a four-day "supercar tour through Tuscany, Italy".
Many of these transactions to promoters were alleged undisclosed commission payments, it is understood.
The company's directors have had their assets frozen as a £155 million claim is launched against them, and have not publicly commented on the claims.
Regulations intended to protect victims from fraud of this kind - known as authorised push payment (APP) fraud - were introduced in October 2024.
They require mandatory repayment of victims who made payments on or after 7 October 2024, with a "contingency" model for payments before this date - the latter being the topic of the current dispute with Lloyds.
Lloyds said that because Godwin appeared "a legitimate investment", it was not covered by the code.
As reported in the Times, the letter to one investor added: "We haven't reviewers the payments under this code, as it doesn't apply to legitimate investments.
"Based on the information you've provided, the payments you made were investments in a legitimate company.
They concluded by adding that there "isn't any evidence currently available" that shows the funds "were not really invested as intended", and said that they could not consider the scheme a scam.
Commenting on the story, a Lloyds spokesman said: "Protecting our customers is our top priority, and we take our financial crime responsibilities very seriously, investing significantly in prevention and detection to help identify suspicious activity."