In August 2004, East London teenagers Hannah Clarke and Jane Cunningham are hanging out in a park when they see a person falling from the roof of a nearby building. Hannah is horrified when she recognises the body as that of her cousin Will.
In June 2005, James and Shakeel infiltrate an exclusive Cambridge school to bug the office and car of economics teacher George Stein, who has suspected links with Help Earth. When he returns to campus, James joins Lauren, Bethany, Jake and surly grey-shirt Dana Smith on a training exercise. James' team is pitted against three other teams, with Kyle and Kerry amongst their ranks, in an urban warfare stimulation while trying to protect a carton of eggs carried by each team member. The exercise ends with James' team having six eggs intact against Kerry's team's five, but Mr Large, having earlier nicknamed Lauren "Puke", refuses to count Lauren's eggs for not having "her real name" on them. When his assistant, Mr Pike, speaks up for Lauren James and Dana are emboldened and threaten to see Mac. Large relents and punishes Kerry's team instead for coming last, but James and Dana still report Large to Mac for bullying. Large is demoted to instructor and Mr Speaks replaces him as head of training.
James and Kerry have an argument and Kerry, fed up with James' behaviour, breaks up with him. A passing blue shirt, Andy Lagan, cannot help but smirk when Kerry throws James' boots at him, and an enraged James attacks him. As punishment, James is suspended from missions, banned from the summer hostel and given cleaning duties. Disgusted by his actions, Kyle, Bruce and the rest of James' friends also ostracise him. James' isolation continues until, while going to clean Zara Asker's office one night, he finds her talking with policewoman and ex-cherub Millie Kentner. Kentner is investigating Leon Tarasov, a Russian immigrant and small-time criminal living in the East London suburb of Palm Hill who has somehow come into enough money to pay off his debts, most likely illegally. James and Dave Moss go undercover to befriend Tarasov's children in order to discover the source of Tarasov's newfound wealth.
Arriving in Palm Hill, James befriends Hannah Clarke, who lives in the same block of flats. James also develops a friendship with Leon's son Max, and impresses his group when he defends them from some older boys from a rival estate. However, James is caught by two police officers and arrested; one, Michael Patel, deliberately whacks James' head against the car roof. Meanwhile, Dave gets Leon and his nephew Pete to help him with his car; Leon, after hearing James and Dave's background, offers them a money-making opportunity stealing cars for Leon to sell. Although James and Dave only make one robbery before losing their nerve, Pete suggests that Leon hire Dave as his replacement at Leon's car dealership when he goes to university.
James gets into a relationship with Hannah, who gives him some of Will's old possessions, including his old computer. When the computer overheats James goes to clean it out and discovers several thousand pounds in cash as well as a CD and some drugs. Running the CD, James and Dave discover that it belongs to a casino that was robbed the previous year, at the same time that Leon was able to pay off his debts. After investigating further, James, Dave, Millie and mission controller John Jones theorise that Leon used Will's computer expertise to help him run the casino's security software and killed him when Will realised what had happened. The investigation also implicates Patel, his wife Patricia Patel, who was a croupier at the casino, and Patel's former police colleague Eric Crisp, a security guard at the casino.
While talking to Hannah later, she mentions that Will had made some money doing a job for Leon and that after he died, Patel examined Will's body to see if he was still alive. James passes this on to John, who sends Lauren and Kerry to break into the Patels' home to check their financial documents. The documents reveal that the Patels used their cut to pay off their debts and buy a car off Leon.
Kerry and Lauren remain in London on standby. After a water fight with the two, James and Kerry kiss, although confusingly Kerry says that she still refuses to speak to him. Later, James and Kerry knock out the Patels with sleeping gas while Dave and John replaces Michael’s car with a "cut-and-shut". When Michael realises this he confronts Leon, and during their conversation hidden microphones record mentions of the casino robbery and Leon’s bribery of local cops. John relays this to James, but Hannah overhears him and when James refuses to tell her the truth about the conversation she leaves. Michael goes to Leon’s car lot to get his money back on the car, but Leon refuses and threatens to inform on Michael for killing Will if he reports Leon. Leon also implicates a former cop, Alan Falco, who John coerces into testifying against Michael in return for immunity. With all the evidence necessary for a conviction, Leon and Michael are arrested.
Returning back to campus, Hannah tries to call James but James instead snaps his mission sim card. Instead, he texts Kerry to admit that he loves her. Kerry replies to promise to talk to him at breakfast.
- Realising that the evidence is stacked against him, Leon Tarasov pleads guilty to robbery and covering up Will Clarke's murder before going to trial and is sentenced to 12 years in prison. Michael Patel, on the other hand, maintained his innocence and was sentenced to life in prison for murder and robbery, with a minimum sentence of 18 years. Patricia Patel receives a suspended two-year sentence for money laundering, her role in the robbery having never been proven, while Eric Crisp remains at large.
- Millie Kentner, disillusioned after failing to realise the corruption of her colleagues, takes a two-month leave of absence before transferring to the Complaints Investigation Bureau, leading an undercover squad exposing corrupt officers.
- 14 Palm Hill police officers are put on trial for corruption. Five are forced to resign, nine receive various sentences and one is acquited. Alan Falco is not charged and testifies against his former colleagues, but is forced to move from his home in Southend after several threats are made against him.
- Pete Tarasov decides not to go to university and instead begins running the car dealership and two pubs owned by Leon, with the assistance of Leon's wife Sacha.
- When James returns to campus his friends forgive him. Kerry decides that she does not want James back - at least for the time being - but the two remain on good terms.