A SUSPECTED rogue trader from Buckhurst Hill is at the centre of a multi-million compensation claim against the financial services watchdog.

A group of 270 investors is preparing a legal challenge against the Financial Services Authority (FSA) over claims it failed to regulate the activities of Terry Freeman, a 60-year-old investment fund manager who was arrested last month on suspicion of money laundering.

The case is being prepared by solicitors acting for the GFX Action Group, which is made up former clients of Mr Freeman who lost money after investing in his company GFX Capital Markets, which collapsed in January with estimated losses of £44million.

Group member Ben Bernstein, 37, from north London, an IT specialist who lost a six-figure sum of cash, said it has had a devastating affect on many local families.

He told the Guardian: "I know a lot of rich people have lost money, but there are many who lost their life savings and are now in terrible trouble because they sold homes or other assets to invest in something which promised excellent returns. My own mother - who is a pensioner and a widow - has lost an enormous amount of money here.

"And it is not fair to say that we didn't show due diligence because we consulted with the FSA and Companies House and we were given no indication of his background - something we have since found out they had on file all along."

The group claim the FSA let Mr Freeman continue to trade despite being made aware he had changed his name from Terry Sparks after being disqualified for 15 years as a director in response to a conviction for an indictable offence.

They say the FSA knew the reason for Mr Freeman's name change and had been notified of concerns of his business practices, but failed to act until the case was reported to police.

In a letter to the FSA, the group's lawyers, BSG Solicitors state: "The FSA was in a unique position, and had various opportunities, to bring Mr Freeman's dealings to a halt and thus significantly reduce the financial decline that my clients' investments were subjected to."

About 800 investors - including professional footballers and police officers - have lost money and Mr Freeman is understood to have received death threats. The drive at his £650,000 detached home in Whitehall Lane has been littered with rubbish and the windows defaced with white paint. Neighbours say they have not seen Mr Freeman or his wife since his arrest on February 9.

Detectives at the City of London's Economic Crime Department say they have been inundated with hundreds of reports from concerned investors and are now picking through the evidence.

Mr Freeman, who has been released on bail, was unavailable for comment but his solicitor says he "maintains his innocence".

The FSA said it could not comment because of the ongoing criminal investigation.