Joe Bloggs facing Bankruptcy

It is believed that Shami Ahmed, the founder of the Joe Bloggs brand, a clothing empire based on his trademark baggy jeans which reached its peak in the Manchester music scene in the 1980s, is facing bankruptcy proceedings after spread betting providers chased him for millions of pounds owed in gambling debts.

A High Court judgement against the fashion tycoon revealed how the millionaire took high risk gambles that failed in grandiose style and left his lenders more than 10 million in the red.

Eaitisham (Shami) Ahmed migrated to the United Kingdom from Pakistan in 1964 when he was just two. He left school at 16 and proceeded to join the family garment business in Burnley. It is thought that Shami went on to accumulate a £60 million fortune which is amazing considering that he basically started from nothing.

Eaitisham (Shami) Ahmed

In better days in the 1980′s and early 1990′s the Joe Bloggs brand generated in excess of £45m in annual turnover driven by the Stone Roses and Happy Mondays. After making his fortune, he was linked with bids for major High Street chains such as Moss Bros and even House of Fraser and even managed to obtain the rights to use the name of Princess Diana’s wedding dress designer, Elizabeth Emmanuel. During this period Shami emerged as one of Britain’s top young entrepreneurs, a multimillionaire by the age of 30 with a garage of Ferraris and Rolls-Royces. However, the brand has lost traction in the last 10 years and profits have been lagging.

In the period 2000 to 2007 Shami Ahmed attempted to regain his lost fortune by placing millions of pounds in spread bets on the stock market, often in the hope of capitalising on a takeover or merger. He made a few big wins like a £9m coup by betting on Moss Bros shares which, however his successess were short-lived and he lost it back just weeks after, an accountant representing HSBC bank told the judge.

Despite suffering heavy losses, Mr Ahmed always found more money to continue his costly activity and finance a lavish lifestyle, to which, the judge commented, Mr Ahmed was strictly committed.

In 2005, Mr Ahmed was absolved in a fraud case involving the HMRC in which he stood accused of having forged his own arrest in an attempt to avoid having to pay creditors. Shami told the court that his family lent him money so that he could continue his lifestyle, in the belief that his misfortune was short-lived.

Mr Ahmed further stated that in better times he used to share his fortune with his family and as a result the whole family benefited from the wealth he had accumulated through his business endeavors. However, he lost his Midas touch in the recession in 2007 when ETX Capital (then known as TradIndex) requested him to pay back the money owed. The provider became increasingly suspicious of Mr Ahmed’s ‘loans’, especially those made from family members.

In a last-ditch attempt to avoid bankruptcy, Mr Ahmed tried to enter into an IVA arrangement with his creditors, the largest of which was HSBC, to which he owed the grand sum of £8.3 million. However, the approval of the individual voluntary arrangement needed the approval of the majority of his creditors (this would have allowed Shami to keep some of his assets) and TradIndex and the HMRC (the last of which were owed £130,000) objected to this arrangement. Ultimately, however, the IVA was approved since HSBC and the Ahmed family voted in favour of the arrangement even though the amount owed in family loans to Mr Ahmed changed during the episode by more than a million.

The aftermath saw TradIndex appealing to the IVA declaring that it was the victim of a case of ‘vote rigging’ and that some of the loans had been inflated. The Ahmed family denied this but the judge still removed several million owed and this resulted in the IVA being declared void. The judge also found blame on Andrew Androniku of the accounts firm Hacker Young for the way he handled the IVA. Mr Androniku, however didn’t comment.

Shami finally declared bankruptcy in April and he now faces a battle with ETX Capital on the remaining assets. Thus, a series of unsuccessful business deals and an ill-fated move into spread betting on shares has finally forced Shami into personal bankruptcy at the age of 47.

Comments: A bitter reminder on the risks of financial spread betting; although this one sounds a bit like a soup-opera and the works of a hardcore gambler. I’m sure Shami is an astute businessman but alas in trading your ego will break you. Ego is one of the trader’s own worst enemies; willingness to take excessive risk is another.

Tags: ETX Capital, etxcapital, gambling, HMRC, tradindex

This entry was posted on Sunday, December 27th, 2009 at 3:25 pm and is filed under Industry News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.