Jewish businessmen Spencer Steinberg, 45, Michael Strubel, 53, and Jolan Saunders, 39, claimed they had won a contract to supply electricals to the Olympic Village ahead of the 2012 London games.
They said Saunders Electrical Wholesalers Limited (SEWL) also supplied goods such as including trouser presses and kettles to major hotel chains.
But SEWL was just a shabby high street electrical retailer in east London – a ‘one man and a van operation’.
Victims were persuaded to invest hundreds of thousands over a period of two months so SEWL could meet urgent orders, then paid seemingly sky-high returns.
They were then asked if they would ‘roll over’ their investment for another two months.
The trio used bogus accounts to impress clients into parting with their cash.
Two investors parted with £2m after being shown fake company invoices that showed they were supplying the Olympic Village.
Others were fooled after Saunders started using doctored invoices from the Park Plaza chain of hotels that suggested they were a major supplier.
The trio were not investigated until the scandal of US investor and notorious fraudster Bernie Madoff hit the headlines in 2008, jurors heard.
Steinberg and Strubel were unanimously convicted of conspiracy to defraud after a five month trial at Southwark Crown Court.
Saunders earlier admitted conspiracy to defraud and acting as a company director while disqualified.
There were floods of tears and shouts of ‘oh no’ from the public gallery as the verdicts were given.
Judge Michael Grieve QC granted Steinberg and Strubel bail ahead of sentence but warned: ‘I am sure you are fully aware of the fact that it is a very serious offence of which you have been convicted and the inevitable sentence is going to be a custodial sentence.’
Opening the case prosecutor Sarah Forshaw QC said the trio raked in £79.5 of investor cash and ‘lived the life of riley’.
She said: ‘The defendants persuaded people to part with their money on the promise they were going to invest it for them in a good, profitable business, then effectively pocked the money themselves.
‘It made them rich, rich at the expense of people they defrauded – you will hear about Bentleys, Ferraris, Porsches and Rolls Royces, you will hear about yachts and million pound houses.
‘You will also hear about how it was that these defendants, for a times, lived the life of riley.’
She continued: ‘When their victims found out what these men had done, there were tears and expressions of regret from both of these defendants.
‘Probably some of these tears were genuine, they knew by then they were in real trouble, they’d been found out.
‘Many of the investors from whom they had stolen money had been friends, they had trusted them.
‘These defendants had rather hoped that the fraud would continue for longer so that their closest friends and even some of their family members would not lose out when the scheme imploded as it did.’
She added: ‘Genuine or not, these expressions of regret were as convincing as the lies they had told in order to persuade people, some of them professional business people, to part with their money – these people are con men and they do it well.’
One balance sheet for SEWL for the year ending 2008 showed revenues of around £100,000, but the following year’s accounts, showed a 2008 end-of-year revenue figure of £43.3million.
A purchasing order of £4.71 for light bulbs for the Grosvenor Hotel was doctored to show an order for £47,000.
Jeremy Stone, an old school friend of Saunders’ at the prestigious Chigwell School in east London, told how he lost £17 million in the scam.
Saunders offered him the chance to invest in SEWL ‘out of the blue’, saying he needed to borrow £256,400 over 30 days to meet an urgent order.
Mr Stone said: ‘My thought was that small business were struggling for investment, and it was somewhere [private] investors could step in and that could be a very profitable arrangement.’
He added that the first request had not been for a very large amount of money, and he also wanted to support a friend he had lost touch with over the previous few years.
Mr Stone brought in his father Martin, an accountant and management consultant, to carry out all the due diligence and to manage the family’s investment in SEWL.
Over the next few years, SEWL apparently seemed so lucrative, Mr Stone employed his father and his sister on salaries of £200,000 and £80,000 respectively to manage the family’s relationship with the company.
He invited 14 other business associates to join him in investing in the company.
Mr Stone said they were sent hundreds of forged bank statements, invoices and other company documents to keep them on board.
He was taking a summer holiday in the summer of 2010 when he received a call from his sister saying she had received a NatWest bank statement for SEWL showing assets of £5 million, with a recent in payment of £5,085,000.
But instead of showing a bottom line of in excess of £10 million, the bank statement read £00.00.
It was only then that the Stone family began to realise the company was not legitimate and launched their own investigations.
They eventually went to the High Court to ask for a freezing order on the assets of Saunders, Steinberg and their business associates.
Mr Stone told the court he ploughed £27 million into the scheme and had £10 million handed back in ‘returns’.
Neither his family nor any of their co-investors have been able to recoup any of the outstanding money.
The trio ran the Ponzi scheme for four years between 2006 and 2010 until they were investigated by the Serious Fraud Office.
Steinberg and Strubel claimed they had no reason to suspect the business was anything but legitimate.
When the Bernie Madoff scandal broke in 2008, one investor told Steinberg he was ‘spooked’ by the seemingly sky high returns he was getting from SEWL.
Steinberg said he was not concerned because Madoff’s business was ‘a city company’.
‘It was a completely different business to Saunders. I didn’t think SEWL was a Ponzi scheme,’ he said.
Steinberg of (1) Lodge End Radlett, Hertfordshire and Strudel of (55) Princes Park, Manor Royal, New Southgate, north London, were both convicted of conspiracy to defraud.
Saunders, of (22) Almonds Avenue, Buckhurst Hill, Essex, admitted the same charge.
A sentencing date is expected to be fixed next week.