Six arrested in Spain for $600m London stock fraud

MADRID: Spanish police said on Wednesday they had arrested six people suspected of involvement in fraud totalling 600 million dollars (450 million euros) on the London stock market.

Among the arrested is the suspected organizer of the fraud, which used forged documents and stock market operations to increase the value of shares in a fake company that were then sold at a profit, a police statement said.

"Through complex commercial and stock market operations, as well as falsifications, the arrested managed to make the value of the shares of a firm on the stock market increase, without deposits to back it up, and profited from the subsequent sale of the shares," it said.

The names of those arrested and the fake company were not released by Spanish police.

The arrests come as faith in financial markets around the world have already been seriously rattled by the international credit crunch and the alleged 50-billion-dollar fraud run by veteran US broker Bernard Madoff.

Britain's Serious Fraud Office began investigating the firm in 2005 when it was suspended from trading on the London Stock Exchange's Alternative Investment Market, the police statement said.

The company said it said it had assets worth 219 million euros when it was listed on the stock market in October 2003, police said.

It subsequently announced several financial operations, including a guarantee in the form of an International Certificates of Deposit from a Brazilian bank, "with the aim of generating an increase in the share price of the company," police added.

"The investigation revealed that the listing of the firm on the stock market, as well as the public share listing, was achieved through fraud and various false announcements were made, in specialized media in London, to generate interest in the shares of the company," the police statement said.

"Those announcements were allegedly planned by the main suspects who then sold the shares that they owned or existed in their name," it added.

Four arrests took place in Barcelona and one each occured in Alicante and Madrid, police said.

Police carried out six searches as part of their investigation in which they seized several computers and extensive documentation.