The art scam that has cost investors £13.8m

“They kept making excuses when nothing was being sold. The one that was sold was after several weeks of me pestering them for answers, but they soon stopped responding,” he said.

Philip Remillard invested more than £90,000 with Smith & Partner after visiting its gallery in west London. His bank, HSBC, said it would not refund him

Six months later liquidators were appointed to wind down the company. According to their estimates, Remillard’s investment is worth about £15,000.

Remillard said: “This is a huge amount of money to lose and it has had a massive impact on my life. It has already taken up too much of my time trying to get my money back.”

Remillard believes that he is a victim of a scam. He asked his bank, HSBC, to refund him under a voluntary code that aims to reimburse fraud victims if they have done nothing wrong. HSBC refused on the grounds that S&P was a genuine company that had failed and not a scam.

It was, HSBC said, a civil dispute and he would have to wait for liquidators to recover what they could from the firm. Remillard lodged a complaint with the Financial Ombudsman Service (FOS), but it agreed with HSBC. He is appealing against the decision.

What went wrong?

S&P was set up in 2015 by an Austrian citizen, but was later taken over by others. Between 2018 and 2023, the company was run by Luke Sparkes, a British businessman, whose correspondence address is Dartford, Kent, according to Companies House.

It marketed itself as an investment firm that would “manage your entire portfolio” and said clients would be assigned an expert art broker. In 2021 it had net assets of £15,645, according to its last filing at Companies House. The company appointed voluntary liquidators in August 2023.

Marco Piacquadio and Dane O’Hara from the insolvency firm FTS Recovery are in charge of unwinding the business, selling assets and repaying creditors.

FTS Recovery is taking court action against S&P under the Insolvency Act 1986 for fraudulent trading and “misappropriation and fraudulent breach of duty”. As part of the case it was granted a freeze on Sparkes’s assets on October 4.

FTS said that S&P was “engaged in a fraudulent art scheme”. The liquidators claim that Sparkes misappropriated as much as £5.9 million from the company, the bulk of which was paid out to him as dividends, according to court papers.

The freeze was extended to include Zeno Fine Art, a firm set up by Sparkes in 2021 to market the art investments, and Callum Ahearne, “a former de facto director or senior employee of the company”.
The liquidators claimed that the dividends paid to Sparkes “were unlawful and paid in breach of duty because, to his knowledge, they represented the proceeds of a fraudulent scheme”.

They said that a number of Sparkes’s “corporate vehicles also received monies as did a number of his relatives” and Ahearne. They said that Zeno Fine Art was paid “some £3.5 million”.

FTS Recovery claimed the art was never sold on the wider market to make a profit, but bought by the firm itself: “Accordingly, there was no genuine profit for the investors because there was no genuine increase in the market value.”

It said that the 64.6 per cent profit cited in S&P’s brochure was “based on one transaction involving the purchase of a Steven Dews print for £360. An investor made a ‘sales request’ and the company acquired the print back from the investor for £650.”

John Steven Dews is a maritime artist. He has no links to S&P.

The liquidators added: “There is simply no evidence of the company having a network of ‘private auctioneers and collectors’ as described in the brochures.”

Smith & Partner’s gallery in London

SMITH & PARTNER

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What about the investors?

Hannah Knight, whose name has been changed, invested £55,000 in 23 artworks with S&P after getting a cold call from the firm in September 2021. Three of her prints were sold for a small profit, including The Mighty Westward by Dews.

After S&P went into liquidation, Knight, 69, discovered that only £10,000 worth of her art was stored in Switzerland — it is not known where her remaining £42,000 is.

Knight said: “I don’t know what my money was used for. I thought I was doing the right thing by checking all details about the firm before making an investment. This whole experience has been a complete nightmare.”

Like many other investors Knight was told that to improve the chances of their portfolios being sold at auction, she should buy more prints.

“In particular they were told by sales staff that their portfolios were going to be sold at the Dubai auction but this was a complete fiction,” the liquidators said. They allege that S&P charged investors inflated prices.

Sparkes claims that S&P charged a mark-up of 100 per cent on the wholesale price of the artworks, which was standard in the industry. FTS Recovery estimates that the actual mark-up was an average of 495 per cent.

In granting the freeze, Sir Julian Flaux, the chancellor of the High Court, said he agreed with the liquidator’s assessment that the company had “held itself out to the public as doing what it was not in fact doing”.

He said there had been “evidence from a sufficient sample of investors to demonstrate an arguable case that investors generally were misled. The evidence is that [Sparkes] perpetrated a massive art fraud of over a thousand investors and misappropriated the proceeds of the scheme for his own personal benefit.”

The civil case is still ongoing.

In June 2023 Knight, a teaching assistant from Peterborough, asked her bank, Lloyds, to refund her £42,000 for art she never received. Lloyds refused, saying that it was a civil matter between her and the company, not a scam. After Knight complained to the ombudsman through the claims firm Refundee, Lloyds agreed to refund her plus £3,000 interest.

Refundee, which takes 15 per cent of all refunds it secures, plus VAT (up to £12,000), has so far helped six S&P art investors to get refunds totalling £383,730. All were Lloyds customers.

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It has submitted claims totalling £2.1 million to 12 banks on behalf of 40 other investors, but these have been refused. About 1,000 people are thought to have been affected in total, with £13.8 million invested.

Remillard and Knight reported their case to the police and the investigation is ongoing.

Lloyds said it refunded Knight before the ombudsman made a decision and that it reviews details of each fraud claim individually and refunds in the majority of cases.

HSBC said it refused refunds because S&P was registered on Companies House, had a physical gallery located in London, positive reviews online and because Remillard had received some money back from S&P. The bank said it now understands that new information has been submitted and is being reviewed by the ombudsman.

HSBC said: “This is an ongoing complaint involving a live police investigation, and we are engaging in dialogue with the ombudsman and the police to come to a resolution.”

The FOS said that if material new evidence comes to light after a case has closed, customers can ask it to relook at their complaint.

Stuart McAlpine said: “Sadly, I have been unwittingly caught up in these unfortunate circumstances. I am devastated that art buyers have been affected. Wherever I can, I have rectified the situation by giving disappointed collectors replacement artworks.”

Luke Sparkes’s lawyer said: “Mr Sparkes maintains that the allegations made against him are without merit and is confident the court will reach that determination at the trial of the action.”

Callum Ahearne could not be reached for comment.