A former director of Crown Currency Exchange – which went bust in 2010 leaving thousands of traders and travellers without £20 million of their money – has been jailed for more than three years.

Edward Norman James, 75, of Glastonbury, was handed a 42-month sentence at Southwark Crown Court on 10 November for his involvement in the foreign currency exchange scam and "carrying on a business with a company with the intent to defraud creditors". He was the final member to be sentenced in connection with the demise of Crown Currency.

The company's boss, Peter Benstead, 72, of Penzance, had been charged with fraudulent trading, money laundering, perverting the course of justice, theft, deception and false accounting and Companies Act offences but he committed suicide during the trial, according to reports.

Administrators brought in to investigate Crown Currency's accounts found it ran a "risky business model" and traded while insolvent for over a year. Essentially, Benstead and James were found to have run a 'Ponzi' scheme whereby money from new investors was used to pay off existing investors, when the money should have come from the company's profits.

Crown Currency appeared on MoneySavingExpert.com's automated holiday money comparison service, and often topped the tables, with good feedback until its demise. It was also a Which? best buy and positively covered in the Guardian and the Daily Mail group as a holiday money provider.

Yet the real issue for consumers was some then used Crown Currency, which also traded as Travel Money Services, to convert large amounts of cash to buy properties, and some kept it with Crown for extended periods, and it was these people who lost the most.

Complaints started to surface from customers after cash they expected to arrive wasn't delivered. When the company collapsed in October 2010, nearly 13,000 overseas cash traders and holidaymakers lost money.

Six other people were also arrested and charged in connection with the failure of Crown Currency. Two women were found not guilty and discharged, while the others received sentences of up to five years' imprisonment earlier this year.

'It is good to see justice served after an event that hurt so many people'

Martin Lewis, founder of MoneySavingExpert.com, says: "It is good to see justice served after an event that hurt so many people.

"Sadly though, while we've certainly learnt the lessons from this terrible firm – putting in extra safety warnings – the authorities haven't. I've given evidence at the Treasury Select Committee and many others have called on politicians and the Financial Conduct Authority to put proper regulations and guidelines into the travel money market to ensure that people are safe and this cannot happen again. Yet they've chosen not to prioritise this. So another Crown could happen again."

Crown Currency Exchange director jailed for three years over fraud
Crown Currency Exchange director jailed for three years over fraud

Bureaux de change are not protected

Crown Currency, which was based in Cornwall and mainly sold overseas money, only took payment by cash, cheque or bank transfer, so those affected did not have the same rights as consumers paying on plastic.

The problem with Crown Currency and other bureaux is that they're not protected. So if you buy cash in advance to pick up weeks later, you have no compensation rights if it goes bust while holding your money.

This is why we warn against using these firms to buy money a long time in advance. There's even a slight risk in using delivery options – handing over your pile of cash in return for theirs is the safest route. See MoneySavingExpert.com's TravelMoneyMax tool to compare the best online rates for your holiday money.

The FCA says bureaux de change don't have to be regulated because they are not viewed as providing a payment service – instead the business is simply seen as selling you goods (foreign cash). And foreign currency is not covered by Financial Services Compensation Scheme (FSCS) protection, which covers the first £85,000 (£75,000 from 1 January) in bank, building society and credit union accounts.