The financial authorities and the police are investigating an underground one-man banking operation in Żurrieq, the Times of Malta has learnt.
Investigations revolve around what seems to be an unlicensed de facto bank operating in Żurrieq.
A spokesman for the Malta Financial Services Authority said that information in hand indicated that the late John Farrugia, the managing director and majority shareholder of DBR Investments Ltd, an investment services licence holder, “was borrowing money from the public and lending it to third parties”.
Independent financial adviser Paul Bonello said he had been approached by a number of people claiming Mr Farrugia, who died last October after a long illness, owed them money. They reported that sometimes they passed money to DBR Investments Ltd in the form of investments.
Mr Bonello said he estimated the sum involved could be well over €10 million. “The practice of accepting retail deposits from a large number of clients and providing wholesale loans to business in a habitual manner for many years has the substantive elements of a bank, but being unlicensed it does not give the statutory safeguards to its customers, including deposit guarantees,” Mr Bonello pointed out.
Some of the affected customers are expected to meet this evening to assess the situation. The meeting was called by Finco Treasury Management Ltd.
Mr Bonello likened the situation to a facet of the Bical failure in the early 1970s, when many small savers walked into licensed premises and were duped into making contracts with an unlicensed operator. This left them penniless, and they spent more than four decades trying to recoup their money, so far unsuccessfully, he added.
Sources close to DBR Investments said the company never authorised any of its officers, including Mr Farrugia, to accept any loans. The company’s business “was well defined and certainly excluded any loans”, they said, adding that any such transactions were not recorded in the company’s books and, if they did happen, it was without the company’s approval.
It was borrowing money from the public and lending it to third parties
The MFSA said on Tuesday it had appointed Paul Mercieca to take charge of the assets of DBR Investments Ltd and to assume control of the company’s business. The company was being investigated by the police to see whether it was involved in “unauthorised activities”.
Mr Bonello was critical of the authorities, insisting that “they knew or should have known of what had been going on for so many years”.
“At law, the MFSA is meant to monitor and investigate business practices that are unlicensed or detrimental and to suppress and prevent such practices,” he said, demanding an inquiry to establish why the illegality had been al-lowed to continue.
Mr Bonello also insisted that the MFSA should appoint a person to assume control over the unlicensed banking business and take possession of any assets and all documentation, utilising the wide powers available at law.
“It is only then that we might get to know the extent of the liabilities involved, what use those deposits had, who are the debtors of the banking operation, whether such loans are recoverable and, finally, distribute any proceeds of assets in an orderly and fair manner to those entitled in terms of law,” Mr Bonello said.