Lloyds Banking Group has declined to reimburse investors who lost money in an alleged £160 million Ponzi scheme linked to Godwin Capital, a loan note investment business that collapsed in 2025. The bank informed one investor that it does not consider the scheme to be a scam, despite ongoing legal actions against Godwin’s directors for alleged mismanagement, fraudulent trading, and breach of fiduciary duty.

Godwin Capital raised approximately £160 million from around 2,500 investors, most of whom are now expected to recover only about 5p for every £1 originally invested. Following the collapse, the directors of Godwin have had their assets frozen as part of a £155 million claim brought against them by insolvency practitioners handling the case.

Regulators and insolvency experts have characterized Godwin as a Ponzi scheme, a fraudulent operation that uses funds from new investors to pay returns to earlier investors rather than engaging in legitimate commercial activities. While Godwin’s directors have not publicly responded to these allegations, investigators have identified that an estimated £35 million of investors’ money was paid as undisclosed commissions to third-party promoters.

These promoters reportedly used Godwin’s banking relationship with Lloyds to reassure investors about the security of their funds, although the information provided was allegedly misleading. Incentives offered to promoters included extravagant rewards such as a four-day luxury supercar tour in Tuscany, Italy, featuring vehicles like a McLaren 720S and a Lamborghini Huracán Performante Spyder.

The question of reimbursement is complicated by regulations introduced in the UK in October 2024 aimed at protecting victims of authorised push payment (APP) fraud. These rules require banks to reimburse victims if payments were made on or after October 7, 2024, under a mandatory reimbursement model. Payments made before that date fall under a voluntary contingency reimbursement model, where banks pledge to repay customers who were not at fault for falling victim to scams.

The complaint to Lloyds falls under this voluntary regime. Lloyds has maintained that because Godwin appeared to be a legitimate investment, it does not meet the criteria for mandatory reimbursement under APP fraud rules. The bank’s position has drawn criticism from victim advocates, who argue that the alleged fraudulent nature of the scheme should warrant compensation despite the investment’s initial appearance.

At present, the legal proceedings against Godwin’s directors continue, with authorities seeking to recover assets to potentially increase returns for defrauded investors. Meanwhile, Lloyds’ refusal highlights ongoing challenges in how financial institutions and regulators respond to complex investment fraud cases, particularly those predating new consumer protection regulations.