The collapse of London Capital & Finance (LCF) in 2017, described by a High Court judge as the “largest Ponzi scheme in British history,” has revived concerns about the growing market for unregulated loan note investment schemes in the UK. Seven years after LCF’s £237 million failure, financial experts and regulators warn that the issues exposed by the scandal have not been resolved and may have worsened.

LCF sold mini-bonds—unlisted, non-transferable debt instruments promising high fixed returns—which attracted thousands of ordinary investors before collapsing. Since then, many similar schemes have emerged under the guise of “loan notes,” a rebranding of mini-bonds, raising hundreds of millions of pounds. These loan note offerings frequently promise attractive returns but operate with weak or opaque governance structures, often without sufficient regulatory oversight.

The Financial Conduct Authority (FCA) has issued public warnings about the risks associated with loan notes but maintains it has limited powers to regulate these products due to a legal loophole. Specifically, many operators market their products relying on an exemption that allows promotion to investors who self-certify as “sophisticated,” thus falling outside the FCA’s regulatory perimeter. The FCA has proposed that the government reconsider this arrangement to better protect investors.

Two prominent schemes, 79th Group and Godwin Capital, whose combined liabilities to investors exceed £365 million, have collapsed amid allegations of operating Ponzi schemes. The former operators of 79th Group, currently investigated by the City of London Police, deny any wrongdoing, while Godwin’s past operators have not responded to inquiries.

Among companies involved in this sector is Hunter Jones, a loan note introducer that claims to have helped raise over £300 million for property investments and has ties to HJ Collection, a property developer with an estimated portfolio value of £120 million. Both firms benefit from small company exemptions, avoiding mandatory audits, and have attracted scrutiny for their business practices. For instance, HJ Collection reportedly handled investor funds through a third-party accountant, JM Cane Accountants, a name with no clear registration at Companies House.

Hunter Jones’s founder, Reece Mennie, is a social media influencer and entrepreneur who uses his profile to promote investment opportunities and hosts a podcast featuring various public figures. Despite this prominence, Hunter Jones has previously been linked to problematic promotions, including the Dolphin property scheme, which collapsed in 2020 leaving approximately 25,000 investors worldwide with nearly £1 billion in losses. Dolphin’s founder was convicted of fraud in Germany last year. Hunter Jones was also involved with Magna Group, which was shut down in 2021 amid findings of misleading investor promotions and ongoing solicitation after insolvency.

Regulatory reviews have highlighted repeated breaches by Hunter Jones, including selling risky investments intended for seasoned investors to individuals with little experience and failing to perform appropriate due diligence. Cases cited by the Financial Ombudsman service include elderly investors incorrectly certified as “sophisticated,” resulting in investments that were deemed unsuitable.

Equity for Growth, a regulated entity providing promotion approval for Hunter Jones, was liquidated in 2020 after being unable to cover compensation ordered by the Ombudsman, further distancing Hunter Jones from regulated oversight.

Industry experts criticize the current reliance on self-certification for “sophisticated” investor status, arguing it leaves many vulnerable investors exposed. Jonathan Hartley of Richardson Hartley Law noted that many clients who lost money were not genuinely sophisticated but felt compelled to declare themselves as such. Mark Taber, a campaigner against investment fraud, described the legislation’s framework as flawed, emphasizing that genuine sophisticated investors would likely avoid schemes with high commission structures and insufficient transparency.

Concerns have also been raised over fees charged by loan note schemes. Reviews and analyses indicate some schemes deduct significant portions of invested capital—up to 30 percent for commissions and marketing, 25 percent for working capital, and additional amounts to pay previous investors—raising questions about the sustainability of promised returns, sometimes advertised as being around 10 percent.

In response to these developments, the FCA has urged the Treasury to reconsider the self-certification exemption, suggesting that firms should be held accountable for verifying investor eligibility rather than relying on investor declarations. The FCA also highlighted the pressure some investors face to self-certify, noting that despite existing warnings, unregulated investment products continue to carry substantial risk and limited protections.

Hunter Jones and HJ Collection have stated their ongoing commitment to supporting investors and identifying quality property opportunities, though they have refrained from addressing specific concerns about the structure and deductions within their investment offerings.

As the loan note market expands, regulatory challenges persist, illustrating ongoing vulnerabilities in the UK’s financial oversight framework and raising questions about investor protection in an evolving landscape of unregulated investment products.