Miranda Moore, QC, prosecuting, said investors were persuaded it was a good bet.
‘It convinced a lot of investors. It was very popular and over £100m was invested by individuals. People were investing their savings, their pension pots.
But Schools only loaned money to a very limited number of firms.
‘In reality, from 2008 until December 2011 there was no genuine independent panel of law firms getting these loans. It was just Schools’ firms,’ the prosecutor said.
‘Funds like this don’t run without reports being sent back to independent directors and they were being sent, saying solicitors were winning cases, so the fund grew.'
Axiom did at its inception in September 2009 highlight the conflict of interest in Schools owning or having shares in law firms they were lending to, such as ATM.
‘He pretended to those at the fund that he had divested himself of ATM to avoid the conflict,’ Ms Moore said.
The fund began to collapse in August 2012 the fund began to collapse after an article appeared in Offshore Alert.
‘It is a business whistleblowing website and the report was under the headline: Head of Cayman fund group Tim Schools accused of serious misconduct in the UK,’ Ms Moore said.
‘Similar articles appeared in the same publication in October of that year. Following this there was widespread withdrawals from investors.
‘To prevent a run on the fund there was a suspension. £109mn had gone in.’
An investigation by accountants KPMG found that 11 solicitors’ firms owed Axiom more than £123mn, with the largest debt coming from Ashton Fox.
The company owed £60mn plus interest and was forecast to pay only £65,000 by the time the loan repayments were due in October 2013.
It went bust and the investor's cash vanished.
‘There were offshore entities that were hiding the funds that had to be proved that they belonged to the defendants,' the prosecutor said.
‘Although £25m was retraced, the costs incurred in all the litigation and tracing meant that of all the money, only £1m was recovered. So the investors effectively lost everything.’
Only £3.1m at most could be repaid to the fund by all the panel law firms by that same deadline.
‘Most of the firms went under,’ said Ms Moore.
Background
The court heard Schools had been struck off as a solicitor back in 2014 for misconduct.
Before he became involved in Axiom he ran a Lancaster-based personal injury firm called Life Repair Group, previously called The Compensation Group, when it collapsed in 2003.
Emmett was struck off in 2018, following the collapse of Axiom.
Emmett denied one count of fraudulent trading and one count of facilitating criminal property and was found not guilty to both.
