UCG Trust – unregulated bonds paying up to 13.5% per annum over 3 years

UCG Trust describe themselves as “an investment marketplace that connects capital investors with borrowers from all over the world of non-bank lenders. It is a new alternative to the traditional banking system.”

The company offers unregulated loan notes paying annual income as follows:

  • US dollars: 9.5% over 1 year, 10.75% over 2 years and 12% over 3 years
  • Euros: 9.25% over 1 year, 10.5% over 2 years and 11.75% over 3 years
  • Pounds sterling: 9% over 1 year, 10.25% over 2 years and 11.5% over 3 years

If the investor is recommended by a friend, they receive an additional 1.5% APR return, so the maximum return offered is 13.5%pa.

Commissions

UCG Trust pays a commission of 1% of the amount invested to anyone who recommends another investor. The recommended investor also receives an additional 1.5% return.

Who are UCG Trust?

There is no information on UCG Trust’s website as to who is behind the business.

The “small print” at the bottom of the website says that UCG Trust is the trading name of UCG Marketplace Ltd, registered at 1000 N West Street, Wilmington, Delaware. There is no company by that name registered with the State of Delaware.

There is however a UCG Marketplace Ltd in the UK which was incorporated in July 2017 with one director and shareholder, Daniel O’Donoghue. The company is registered to “Suite 13069 43 Bedford Street, London, United Kingdom, WC2E 9HA”, which is a branch of Mail Boxes Etc. Whether this is related to UCG Trust is unclear.

The UCGTrust.com website was registered on 18th January 2016.

Is UCG Trust safe?

These are unregulated investments and should UCG Trust default, investors risk losing up to 100% of their money.

UCG Trust states that they “provide lending to small businesses fully online combining 5 lending platforms in United Kingdom, Czech Republic, Slovakia, Malaysia and India”.

If UCG Trust fail to make sufficient returns from their lending to small businesses, there is a risk that they default on their bonds.

UCG Trust however claims in various pages on its website that “All the risks of investing in lending secured by the company under AASA” (I have been unable to find out what this acronym means), “Forget about loses of your investment and start joining thousands of investors earning solid returns with the simple investment process” and under its FAQs “How is my money protected? – All investments are secured by the company. It means that all defaulted loans will be covered by the profit of UCG TRUST.”

UCG Trust cannot make any profits if its obligations to investors exceed the money it makes from its borrowers. The cost of borrowing is deducted before you calculate your profit.

Perhaps this refers to retained profits from previous surpluses of funds received from borrowers, after making repayments to investors. But UCG Trust cannot possibly have much in the way of retained profits when it has only been in business for two years at most.

If UCG Trust does have sufficient funds to guarantee payments to investors, why solicit investment in the first place? Why not loan those funds out to small businesses, and take all of the profit, without paying out up to 13.5% to investors?

Despite UCG Trust’s exhortation to “forget about loses”, if UCG Trust receives insufficient money from borrowers and has insufficient retained profits to meet obligations to investors, investors risk losing up to 100% of their money.

Offering unregulated securities in the US and unauthorised financial promotions in the UK

UCG Trust, which claims to be based in Delaware, USA, with its offering of loan notes paying up to 13.5% in US Dollars, clearly represent a securities offering to US investors. Offering securities in the US requires authorisation from the USA’s Securities and Exchange Commission.

UCG Trust’s website also clearly represents a financial promotion to UK investors by inducing them to engage in investment activity by investing in its sterling loan notes. Both P2P lending and offering financial promotions to UK investors requires authorisation from the UK’s Financial Conduct Authority.

A search on both the SEC’s and the FCA’s registers for UCG or United Capital Group returned no results.

The only regulatory authorisation UCG claims is “All activities of UCG TRUST within EEA are maintained and supported by the United Capital Group, authorised and regulated company by the Commission de Surveillance du Secteur Financier (CSSF)”. A search for UCG or United Capital Group on the CSSF’s register again returned no results.

UCG Trust is committing criminal offences in both the United States and United Kingdom by offering unregistered securities / P2P lending and unauthorised financial promotions respectively.

Should I invest with UCG Trust?

This blog does not provide financial advice. The following are statements of fact based on publicly available information, or near-universally accepted investment principles; they are not personalised recommendations. Investors should consult a regulated independent financial adviser if they are in any doubt.

Despite UCG Trust’s claim to be risk-free, there is clearly a significant risk of capital loss should its loans to small businesses fail to pay sufficient returns to meet its obligations to investors.

Furthermore, the firm is offering unregistered securities in the United States, and offering a P2P lending platform and unauthorised financial promotions in the United Kingdom. Offering unregistered securities in the United States and carrying on a regulated activity without authorisation in the United Kingdom are criminal offences in both countries.

Do not invest unless you are prepared to risk 100% losses.

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