The former clients of GFX Capital have said that the FSA were aware of allegations against its boss Terry Freeman, before the company folded with estimated losses of £44 million.

Foreign exchange trader, Terry Freeman, had been on the FSA’s radar for over two years, with the City watchdog informed that he had once been disqualified as a director due to an unknown conviction, and that he had changed his name.

However, it has emerged that nothing was done to intervene in Mr Freeman’s suspicious business activities, described as having “elements of a Ponzi scheme.”

Eventually, worried investors turned Mr Freeman into the police. Last month the City of London Police detained the trader on suspicion of trading offences and money laundering.

Over 800 investors have apparently lost money in GFX Capital, which collapsed last year as clients found themselves unable to access their accounts.

Mr Freeman has claimed that the business problems are administrative ones. He set up GFX Capital in 2004 and the FSA were warned of his shady past that same year. He had previously been disqualified as a director by Companies House in 1997 under his real name of Terence Sparks.  

It has been said that the FSA were alerted again in 2007 by another foreign exchange trader concerned about Mr Freeman’s business practices.

The allegations come at a bad time for the regulator as it faces widespread condemnation for its “light touch” regulation that has been described as being “asleep behind the wheel.”