Four men who defrauded investors of $10m in a complicated ‘Ponzi’-scheme’ fraud were today sentenced to 10 years in prison.

A fifth man, Martin Shaughnessy, was sentenced in September 2008.

The fraud, investigated by the Serious Fraud Office and Cheshire Police, involved a project to extract gold from spent ore, although not an ounce was produced and no revenue was generated.

Two of the men, Frederick Taylor and Martin Shaughnessy, both former Cheshire police officers, ran Maincrest Investments Ltd and London & General Finance Ltd between 1996 and 1998 from an office in Lymm, Cheshire, according to the Serious Fraud Office.

They solicited investments from wealthy individuals in multiples of $100,000 — usually through intermediaries who were paid high levels of commission — from investors in locations across the world including Arizona, Texas, New Mexico, Netherlands, Holland, Bulgaria, Hungary, Canada, Spain and Singapore as well as the United Kingdom.

Investors believed they were buying into a lucrative opportunity to be involved in select bank trading programmes where returns would reach 80 to 100% within 12 months, the SFO said.

Almost $9 million was handed over by nearly 30 investors. These funds were not invested in the way proposed and instead earlier investors were paid with money from newer investors, in a Ponzi-type fraud, the SFO added.

Without the knowledge of the investors, the funds were transferred to an enterprise ostensibly set up for the commercial extraction of gold from spent ore or power station waste ash at a plant in Texas.

The company, Anglo American Metals Inc, did not go into production.

Following a joint investigation by the SFO and the Cheshire Constabulary, on dates between February and April 2006 the defendants Frederick Taylor, Martin Shaughnessy, Christopher Darke, Ian Whittock, Paul de Rome and Malcolm Bradley were charged with one or more offences of conspiracy to defraud, fraudulent trading, false accounting and making false or misleading statements.

De Rome was also charged with using a false instrument.

Paul De Rome was sentenced to 46 months in prison, Frederick Taylor (36 months), Christopher Darke (28 months), and Ian Whittock 14 months in prison, suspended for 2 years.

In addition, De Rome and Taylor were disqualified from being a director of a company for 10 years.

Confiscation proceedings are underway against De Rome, Darke, Taylor and Whittock and are due to conclude in September 2009.

Shaughnessy, who admitted to fraudulent trading, was sentenced on 23rd September 2008 to 16 months’ imprisonment suspended for two years and a seven-year disqualification from holding a company position. He was ordered to pay £38,000 by confiscation.