City watchdog faces huge claim over 'rogue trader'

The City watchdog faces a huge compensation claim from investors who say it failed to act quickly against a suspected rogue trader, it was reported today.

They accuse the Financial Services Authority of not acting on serious concerns about the activities of Terry Freeman, the boss of GFX Capital Markets, which has collapsed with losses of £44million, according to The Times.

About 800, including footballers and Metropolitan Police officers, are thought to have lost money.

The watchdog apparently looked into the affairs of foreign trader Mr Freeman for at least two years, but is said not to have acted before the City of London Police was tipped off.

Mr Freeman was reportedly detained last month on suspicion of trading offences and money laundering, although his solicitor said: "Mr Freeman maintains his innocence and will be vindicated in the fullness of time."

The action is being launched by the GFX Action Group.

Separately, police and fraud officers are investigating suspected "mini-Madoff" scams. Richard Alderman, director of the Serious Fraud Office, said it was investigating hedge funds.

The Standard revealed last month that the SFO was looking at six cases of alleged swindling by financial institutions linked to the credit crunch, including banks. A seventh inquiry has since been launched.

"We are talking about quite large-scale fraud as a result of the credit crunch," said Mr Alderman.

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