Fraud squad probes City 'scam'

A spread-betting scam in which a group of young City workers are thought to have won more than £2 million is being investigated by fraud squad detectives.

Share spread betting involves punters gambling on whether shares will rise or fall in value over a given period. There are concerns that insider information has been used to win huge sums. Officers have widened a probe to take in 10 major firms.

The inquiry may blow open a con which police believe is becoming increasingly common in the City.

Five men, including one "highly regarded" young broker from Credit Suisse First Boston, have been arrested and released on bail. They are alleged to have used privileged inside information to have placed a number of spread bets on the future performance of UK and US-listed shares.

Both the Financial Services Authority (FSA) - the City watchdog - and its American counterpart, the Securities and Exchange Committee, have been informed and are taking an interest in the case.

A senior detective from the City of London force said: "We now have a list of at least 10 firms. We may find more we want to look at. The investigation is still ongoing."

It has so far uncovered thousands of transactions which led to traders winning in excess of £2 million, he said.

The investigation was sparked by concerns from IG Index, the spreadbetting firm whose founder Stuart Wheeler donated £5 million to the Conservative Party. The company notified the police about a series of unusual bets.

It is alleged that the Cr?dit Suisse broker had used insider information from meetings with clients and confidential documents to place the bets. The company has since dismissed him.

The five suspects are all from London or Hertfordshire and are in their twenties or early thirties. One is said by The Times to be "an accountant of sorts".

Three of the men do not work in the City but are alleged to have provided the cash to make the bets.

None have yet been charged but it is thought police are almost ready to present a case to the Crown Prosecution Service.

There are only seven financial spread-betting companies in the country and all have been contacted by the fraud squad. None have been accused of complicity with the alleged insider traders.

Superintendent Ken Farrow, the detective in charge of the case, said: "Our inquiries so far show that each of the firms is very much the victim in this case."

Some US banks ban their staff from opening spread-betting accounts, but few British banks have followed suit.

The FSA has refused to identify the Cr?dit Suisse broker. If he is found guilty, on top of any punishment from the court, his licence to trade in the City would be revoked.

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