Loan fraud and insolvency risks: The case of a fraudulent Bounce Back Loan claim

Stanislav Genadiev, an electrician from Romford, was recently ordered to repay over ￡56,000 or face jail time after fraudulently claiming two Bounce Back Loans (BBLs) totaling ￡100,000 during the Covid pandemic. This case, investigated by the Insolvency Service, highlights the severe legal and financial consequences for directors who misuse government support schemes, like BBLs, which were intended to provide economic relief to businesses struggling due to Covid.

Fraudulent applications:

• False loan claims: Genadiev applied for a ￡50,000 BBL for his business, K and S Installation Ltd, falsely claiming a turnover of ￡200,000 in 2019. However, the company’s real turnover was only ￡85,000. He later applied for a second ￡50,000 loan for a perfume business that was no longer trading.
• Misuse of funds: Instead of using the funds for legitimate business purposes, Genadiev spent the money on personal debts, groceries, and designer clothing. The funds were not used to support his businesses as required under the terms of the scheme.

The Insolvency Service investigation: The Insolvency Service uncovered assets worth nearly ￡57,000, including equity in Genadiev’s home and land in Bulgaria, which led to a confiscation order. Genadiev now faces an ultimatum: repay the amount or serve 18 months in prison. Additionally, if more assets are uncovered in the future, Genadiev will still be liable for the remaining amount.

Consequences for directors: Genadiev’s actions resulted in:

• A two-year suspended prison sentence,
• 150 hours of unpaid work, and
• A confiscation order demanding repayment of the fraudulently obtained funds.

This case serves as a stark reminder of the serious legal risks directors face when committing loan fraud. The misuse of taxpayer funds is treated with zero tolerance, and directors can be held personally liable for their actions.

How AABRS can help: At AABRS , we assist directors and businesses facing insolvency, including those entangled in financial misconduct such as loan fraud. Our services include:

• Asset recovery: We work with businesses to recover funds that have been misappropriated and help directors rectify financial issues before they escalate.
• Insolvency advice: If your clients face financial distress or misuse of loans, we provide expert advice to navigate insolvency procedures, avoid further penalties, and implement business recovery plans.
• Support: We offer guidance to directors who may unknowingly find themselves in breach of loan terms, helping them understand their duties and obligations.

For accountants advising clients on Covid loans or directors worried about financial misconduct, AABRS can provide the support needed to resolve these complex issues. Fraudulent use of government schemes has severe consequences, but timely advice can mitigate the damage and help businesses get back on track.

Source: Electrician who fraudulently secured Covid loans to pay-off personal debts ordered to repay ￡56,000 or go to jail - GOV.UK (www.gov.uk)