The Financial Services Authority (FSA) has made a major breakthrough in battling infamous land banking firms.

The authority found that the firms had been claiming plots of land posed an investment opportunity when in reality many were unlikely to be granted planning permission.

Two important decisions were made in the High Court yesterday following the FSA’s intervention. The case resulted in winding up one unauthorised land bank and securing a world-wide injunction against another.

The High Court made the winding up order against tarnished firm Plott UK Limited (Plott), and approved the appointment of a liquidator who will now identify, realise, and distribute the company’s assets to its creditors.

In a separate hearing, the High Court continued a world-wide freezing and restraint order against European Property Investments (UK) Limited (EPI).

The FSA believes that EPI is a ‘phoenix’ of Plott, that is: it took over Plott’s business once the FSA’s action against Plott began.

Between May 2009 and April 2011, Plott UK Limited collected around £3.9 million from UK consumers looking to invest. The firm promised investors average returns of between 200 per cent and 300 per cent.

However, at least one of the sites the firm was promoting is located in a designated area of outstanding natural beauty, so therefore unlikely to ever receive planning permission.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:“This is an important outcome and sends a warning to other unauthorised land banks that the FSA can and will act decisively to shut them down.

“Consumers are much better off not putting their money into these schemes since, by the time we can catch up with the operators, most of the money has disappeared and investors are left with land thats value simply doesn’t reflect the money paid for it.

“In our experience operators of unauthorised land banking schemes do not work in isolation, they often work together and their schemes are evolving. We are working hard to stop them but the lesson remains: do not deal with unauthorised businesses as you are not covered by the Financial Services Compensation Scheme.

“Once the dust has settled we hope to be able to repatriate remaining funds to customers of both companies, but it is likely that some people will not get any of their money back.”

Many of Plott’s customers invested a minimum of £10,000 with the company, but the FSA is aware that some Plott customers invested many tens, and in some cases hundreds, of thousands of pounds with the company.

European Property Investments owned two sites that Plott was promoting, however it appears to have only become active after the FSA had taken action against Plott.

According to BBC News the investors are not covered by the Financial Services Compensation Scheme because the businesses were unauthorised.