Police in Spain made several arrests, closed offices and confiscated material yesterday in connection with a massive fraud operation which may have cost over 350,000 private investors their life savings in Spain. The operation took place yesterday as the offices of two companies, Afinsa Bienes Tangibles and Forum Filatélico were searched by armed police in Madrid, Barcelona, Vigo and Valladolid. Documents and computers were taken away from the buildings, 10 million euros was found in a raid on a house in the suburbs of Madrid and nine people were arrested. The judge leading the operation has ruled that the investigations remain secret until accusations have been formalised, maybe later today.

Police told reporters yesterday that the two companies were suspected of fraudulent business attracting mass savings in many Spanish towns, offering high returns and using collections of stamps of proven value and other physical goods as guarantees. The companies are accused of operating a pyramid-style fraud opeartion, using the money from new investors to pay the returns on previous investments.

Many of the investors are pensioners for whom investing their savings in rare stamp collections appeared a more attractive option than placing it in a lower-return bank savings account. Yesterday as news of the raids leaked, many pensioners went to the offices of Ainsa and Forum to recover their money, but police did not allow anyone to enter the buildings.

After Sotheby’s and Christie’s, Afinsa is the world’s third biggest collectibles company and through its controlling stake in Escala Group operates in other European cities (including London), the USA and Asia. The company has published a note on its website (www.afinsa.com) today reassuring its clients and employees that it is cooperating with authorities in order to prove its innocence.

Afinsa is not a registered financial institution which means that its advises its customers on how to invest their money. Customers of Afinsa and Forum who found that they were unable to recover their money as the scandal unfolded yesterday have already formed an association.

As the scale of the operation became clear yesterday, the Director General of Consumers said that although the Government does not have any funds to compensate victims of a fraud of this kind, she has called a meeting tomorrow with representatives from the autonomous governments to discuss how to channel applications for compensation of what for some people is the loss of a whole life’s savings. She has also said that the Government will study how to modify the law in order to give private investors greater protection in the future.