Farm land was sold with a false hope of planning permission
An illegal landbanking scheme that has taken £69m from 4,500 people is being closed down by the Financial Services Authority (FSA).
The regulator has asked the High Court to wind up the scheme, called UK Land Investments (UKLI), because it operated as an illegal collective investment.
As such, there was no protection in place for the investors' money.
The company went bust in April and administrators from the accountancy firm Deloitte were appointed.
"The FSA will not hesitate to pursue companies like UKLI which offer unauthorised and illegal services which put such investments at unnecessary risk," said Jonathan Phelan of the FSA.
"Our action, against UKLI, should serve as a warning to other companies that might be breaking the law in this way," he declared.
UKLI, which had its main office in Berkeley Square in central London, was the UK's largest landbanking company.
It had bought and sold about 5,000 plots of farm land to its investors at a substantial mark-up.
The company claimed that the land would subsequently get planning permission, enabling the plots to be sold again, at an even greater profit, to developers.
The FSA said none of the firm's land had ever been given planning permission.
The company started operating in 2002 and soon got into trouble with several banks - HSBC, NatWest and Royal Bank of Scotland - by claiming falsely that they were its partners.
The administrators from Deloitte are planning to hold a meeting for creditors and plot holders later in June.
Those who have had their land registered at the Land Registry are free to sell their plots, but have been warned they are likely to be worth far less than they paid.