Bar Works investors who lost millions of dirhams in a hot-desking Ponzi scheme will likely recover a fraction of their investments, according to the US Securities and Exchange Commission.
A tax administrator, appointed by New York courts, will deduct a percentage from the $662,781 so far recovered from the scam, before it is re-distributed to victims.
The news is a blow to the scores of UAE investors, who had hoped for substantially more from the $37 million pumped into the fraudulent fund operated by British former accountant Renwick Haddow, 51.
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Kamal Singh, who lives in Abu Dhabi, lost more than $150,000 to the fraudster after being sold investments by a brokerage in Dubai.
“After three years of waiting and continual extension to the court proceedings, we were not expecting to recover such a fraction of our original investments,” he said.
“This is a very frustrating outcome after waiting so long.
“Anything less than 10-15 per cent of what we had lost would have been disappointing, but this news is like rubbing salt into the wound.”
At least 40 investors have officially come forward from the UAE, with many more worldwide also caught up in the scam.
The recovered funds will only be distributed to those who have registered to the federal courts in America as creditors.
Income tax of between 10-12 per cent will then be deducted as the figure is likely to be well below the $40,125 threshold for higher tariffs of taxation.
The Bar Works scheme sold bogus investments in unused restaurants and bars in New York, San Francisco and Istanbul as temporary office space.
Haddow, who operated under the alias of Johnathan Black, was due to be sentenced in October, but that was pushed back to January to give more time to recover the remaining millions that appear to have vanished.
The Briton fled to Morocco, where he was arrested in an FBI sting operation in 2017 and extradited to the US. He now faces up to 40 years in prison in the US for wire fraud.
Two other men have already been convicted for their role in the scam.
Savraj Gata-Aura, 33, was sentenced to four years in jail while James Moore, 58, was convicted of one count of wire fraud and another of wire fraud conspiracy.
Moore, also British, was convicted in June last year after a week long jury trial but is yet to be sentenced.
Prosecutors said he received more than $1.6m in commissions from the scheme.
Sales events were staged at five-star hotels around the world, while brokers also pushed Bar Works investments.
New Jersey lawyers, acting on behalf of a group of investors from Dubai and Abu Dhabi, said an appointed tax administrator showed the courts were prepared to redistribute recovered funds, rather than use the cash to pay fines imposed on the defendants.
Once Haddow is sentenced, there is no longer an incentive for him to co-operate with federal authorities, limiting the chances of more funds being recouped, they said.
Jocelyn Houghton, a former Dubai cabin crew who is now a lawyer in Australia, said investors are facing up to the painful truth of losing most of their investment.
“After four years, countless emails and a lot of back and forth it seems way easier to invest $50,000 in a Ponzi scheme than try to recoup $1,000 after the fact,” she said.
“This has been a huge lesson to find out that of the total $37m scammed, just 1.8 per cent has been collected.
“It is hardly enough to satisfy even 13 investors.
“I’m in a WhatsApp group with 46 victims all in the same boat as me.
“It is painful, but we have to let it go in order to move on in life.”
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