Dolphin Trust to make exit offer to investors; warns of potential for total losses

Troubled German property scheme Dolphin Trust (now known as German Property Group) has frozen payments to investors in Ireland and told them it hopes to recover their money after receiving a buyout approach for their property assets.

According to The Times, an introducer has told investors that they risk losing everything if they enforce their loans to Dolphin Trust.

Dolphin Trust has been offering its loans to investors since at least 2013, when it was offering 12% per year for a 5 yar term. An investor told the BBC in 2018 that it successfully returned their money.

How Dolphin Trust went so quickly from paying out 12% per year (and 20% commission) to introducers telling investors that there is not even enough money to pay administrators is not clear. Dolphin is already paying restructuring specialists CFE to manage its cashflow problems.

Dolphin Trust has taken in nearly a billion euros from investors in Ireland, Britain, South Korea, France, Singapore and Russia.

Dolphin’s tentacles

Dolphin Trust has or had three offshoots in the United Kingdom in particular:

 

• Project Seascape, a P2P investment offered via Nicola “Superwoman” Horlick’s Money & Co
• Grounds Investments, which abruptly and mysteriously reverse ferreted and returned investors’ money after attempting to raise money via an IFISA (again using Money & Co as a conduit)
• Vordere plc, an AIM-listed company which Dolphin gained by acquiring and renaming a company called Acorn Growth plc.

Some Dolphin investors were offered Vordere shares in lieu of repayment of their loans.

Vordere shares were suspended in July 2019. In October 2019 three Vordere directors were ousted by shareholders following allegations of fraud.

On the 16 September 2019, following the Annual General Meeting, one of the Company’s major shareholders, Mr John O’Donnell, requisitioned a General Meeting of the Company for shareholders to consider the removal of three of the incumbent Directors, Nicholas Hofgren, Stuart Cheek and Graeme Johnson, and the appointment of David Irving as a Director of the Company. Allegations of fraud were made and the Company is currently working through the fact finding stage of their investigation into these allegations and will update shareholders once finalised.

Hofgren and Cheek were directors of Dolphin Property Fund 1, a cell of GFC Fund PCC registered in Guernsey.

The investigation into these allegations continues, with the company recently obtaining an injunction in the UK High Court:

preventing the former directors from deleting or destroying Company documents and requiring them to deliver up certain Company documents by 14 February 2020.

UK public on the hook

Should Dolphin collapse, one significant loser is set to be the UK general public.

Any investor who was advised to invest in Dolphin Trust by an FCA-regulated adviser, or invested via an FCA-regulated SIPP provider, has a slam-dunk case for compensation, which would be covered by the Financial Services Compensation scheme. (And, incidentally, there is no need to use one of the solicitors or Claims Management Companies jockeying for position in Google searches for Dolphin Trust.)

When the FSCS pays compensation in respect for bad advice or poor pension trusteeship in respect of an unregulated investment, it takes on the right to any returns from the unregulated scheme (so the investor does not get to have their cake and eat it if the investment somehow comes good).

A significant tranche of investors in a German property scheme – those using FCA-regulated advisers or SIPPs – will therefore be bailed out by the UK general public via the charges they pay for regulated investments.

It would be tempting to wangle in a Brexit angle here, but the fact is that Dolphin could have been from Burkina Faso or Cape Verde for all anyone cares. Dolphin Trust itself broke no rules as far as its offering to UK investors is concerned; as long as the UK allows securities to be offered to the public without requiring those securities to be regulated, there is nothing to stop overseas unregulated investment schemes from attracting investment from UK investors, except finding a UK adviser or unregulated introducer to do the work of sourcing them (taking on the legal liability of ensuring suitability or exemption from financial promotion rules).

The Brexit angle is that now the UK has left the European Union, there is no reason whatsoever not to require all investment securities advertised in the UK to be registered with the Financial Conduct Authority – whether from the UK, Germany or Timbuktu.