Three company directors have each been banned for seven years from running companies after 42 investors were misled about the return of £4.13m they had ploughed into a student accommodation development in Derby.

Described as ‘high net worth’ individuals, one invested £504,000 in the scheme.

53-year-old Fraser MacDonald, 49-year-old Gavin Barry and 52-year-old Edward Fowkes were all connected to companies involved in fund raising or the development of The Croft.

The 326-room, £23m development (main image), which is named after Tomb Raider character Lara Croft who was developed by a Derby tech firm, was opened in September 2019 promising students upmarket rooms to rent from £185 a week.

But the companies behind the scheme, Prosperity Cathedral View Development Ltd and Prosperity Cathedral View NMPI Ltd went into administration in 2020 with liabilities totalling £40 million and investors subsequently discovered they were lower down the priority list of creditors than they had originally been told.

Instead, commercial lenders who had ploughed in over £16 million into The Coft were given priority over them.

The Insolvency Service says MacDonald, as the scheme’s Investment Relations Director, “allowed investors to be misled when they entered into loan agreements with Prosperity Cathedral View NMPI”.

Investors thought their money would go into the Derby development, but instead more than £2 million was transferred to a connected company.

All three directors have been banned from running, managing or promoting a company without permission of the court for seven years.

“Fraser MacDonald, Gavin Barry and Edward Fowkes allowed the continued promotion of an investment offer which was misleading to investors,” says Ann Oliver, Chief Investigator at the Insolvency Service.

“Significant sums of money were invested by people who thought they had more security over their investments than they actually did.

“We also uncovered evidence that the three directors did not use all the funds borrowed for financing the development at The Croft development as they had promised.

Administrators sold The Croft for more than £18 million in March 2021 with the priority lender being repaid in full and the second commercial lender being partially repaid. However, no money was returned to the 42 investors.

A financial settlement has also been reached between MacDonald and the liquidators of Prosperity Cathedral View NMPI.