A whistleblower has accused the Financial Services Authority (FSA) and its successor, the Financial Conduct Authority (FCA), of catastrophic failures in their handling of fraud allegations at short-term mortgage lender Tiuta.
George Patellis, who served as Tiuta’s CEO in 2011, claims the regulators ignored his warnings, enabling a Ponzi scheme that ultimately cost investors over £100 million.
The full extent of the alleged failing of regulators, and the poor treatment of Patellis, are exposed in a report, published today, by the All Party Parliamentary Group (APPG) into investment fraud and fairer financial services.
EXPOSING THE FRAUD
Patellis (pictured in 2012) discovered the fraud shortly after his appointment as CEO, when the company’s newly hired CFO revealed a £20 million cash shortfall. Upon further investigation, Patellis uncovered evidence of fraudulent activity, including the misuse of investor funds, false financial statements, and unlawful trading practices. At an emergency board meeting, Tiuta’s chairman admitted that loan redemption money meant for investors had been misappropriated to prop up the failing company.
Realising the scale of the fraud, Patellis resigned and reported his concerns to the FSA under regulatory Principle 11, which obligates executives to disclose serious financial issues. He offered to present evidence, including detailed financial records and admissions from the perpetrators, to support his claims.
FSA officials refused to accept the materials during the meeting, citing vague reasons
A SUITCASE FULL OF EVIDENCE IGNORED
In March 2011, two months after Patellis first alerted the FSA, the regulator requested a meeting at its London headquarters. At his own expense, Patellis flew back to the UK from the US, bringing a suitcase full of documents that mapped out the fraud. Despite their request for evidence, FSA officials refused to accept the materials during the meeting, citing vague reasons. Days later, they requested that he mail the documents instead.
Patellis complied, sending a detailed seven-page letter and 26 exhibits to the FSA. However, according to Patellis, the regulator failed to act on the evidence and allowed Tiuta to continue its fraudulent activities for another 17 months.
REGULATORY INACTION AND COMPLICITY
Patellis alleges that the FSA’s inaction directly contributed to escalating investor losses. Instead of taking decisive steps to halt the fraud, the regulator engaged in ineffective oversight, accepting implausible excuses from Tiuta’s management. The company’s Ponzi scheme continued, with funds meant for investors diverted to other uses, including personal expenses for executives and connected parties.
Further revelations include allegations that the FSA tipped off Tiuta about the whistleblowing allegations, giving the company time to craft a false narrative and discredit Patellis. This breach of confidentiality led to threats against Patellis, including death threats.
FCA’S FAILURE TO ACKNOWLEDGE WHISTLEBLOWER STATUS
In 2015, Patellis filed a formal complaint against the FCA, accusing the regulator of mishandling his disclosures and failing to classify him as a whistleblower. The FCA dismissed his claims, asserting that he was merely an “approved person providing intelligence.” This stance, coupled with public statements downplaying the evidence Patellis provided, tarnished his professional reputation and limited his career prospects, he claimed.
The FCA’s internal investigation into the case was criticised as inadequate, with the Complaints Commissioner later confirming that the regulator had failed to examine the evidence Patellis submitted. The Commissioner’s 2016 report highlighted multiple shortcomings, including the regulator’s failure to report fraud allegations to law enforcement and its reluctance to acknowledge its own role in enabling the misconduct.
“The regulators’ inaction and gullibility allowed the fraud to escalate, leaving investors to bear the brunt of their negligence”
UNANSWERED QUESTIONS AND CALLS FOR REFORM
Patellis continues to call for accountability, arguing that the regulators’ failures were not due to mere incompetence but reflected deeper systemic issues. He cites conflicts of interest, a lack of due diligence, and a pattern of prioritising industry relationships over consumer protection.
“The collapse of the Connaught Income Fund was entirely preventable,” Patellis said. “The regulators’ inaction and gullibility allowed the fraud to escalate, leaving investors to bear the brunt of their negligence.”
Despite recommendations for the FCA to issue a public apology and increase compensation for Patellis, the regulator has resisted taking full accountability. The case raises serious concerns about the effectiveness of the UK’s financial watchdogs in protecting investors and holding firms accountable for misconduct.
For the investors left with staggering losses, the FCA’s failures remain a cautionary tale of what happens when oversight is delayed, dismissed, or ignored.
