Krono Partners update: management team member charged with securities fraud

We last checked in with the Krono Partners administration a year ago. Krono Partners collapsed in March 2018 after raising money from investors supposedly for investment in distressed real estate and micro loans.

When Krono collapsed, almost all of the remaining money was dependent on a “Company Y” loan platform, which supposedly was going to raise funds for other projects and pay commission to Krono, in return for the money invested in it from Krono investors.

I missed the administrators’ April update due to being somewhat pre-occupied.

The big news since last October is that a member of Krono’s “management team” has been extradited to the US and charged with fraud. Ulrik Debo is described by the administrators as “playing a significant part of the Company” despite not appearing on Krono’s list of directors registered with Companies House.

Debo is also a director of Company Y.

The U.S. Securities and Exchange Commission alleges:

As alleged, from at least 2013 through December 2019, [Kenneth] CIAPALA and his firm, BLACKLIGHT, as well as others, conspired to defraud the investing public by orchestrating and facilitating the manipulation of multiple publicly traded stocks, commonly referred to as “pump and dump” schemes. The vast majority of the stocks that CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators sought to manipulate were “penny” or “microcap” stocks that traded in the United States on the over-the-counter (“OTC”) market. In executing these pump and dump schemes, CIAPALA, BLACKLIGHT, DEBO, and their co-conspirators (i) secretly amassed beneficial ownership of all, or substantially all, of the stock of certain publicly traded companies; (ii) began manipulating the price and demand for these stocks through, among other means, the release of materially false information to the investing public and manipulative trading practices, thereby causing the share price of these stocks to become artificially inflated; and (iii) sold out of their secretly-amassed positions at artificially inflated values at the expense of the investing public.

Krono Partners appears not to be mentioned in the SEC’s case.

It is notable that if the SEC’s allegations are true, the pump and dump scheme of which Debo is alleged to have been a part started in 2013.

Krono Partners was incorporated in 2013. The administrators have previously revealed that the UK’s Financial Conduct Authority investigated Krono in 2014 and took no further action.

[Krono Partners] was contacted by the FCA in 2014 which undertook a review of the Company and its products. The Company instructed Peters and Peters, a firm of solicitors, to help with the FCA review. After 4 months, the FCA closed its case and confirmed the Company could continue its business.

As for Company Y, there is still no sign of any actual returns.

Previously, the administrators have been able to provide detailed updates on the position in relation to these projects but the administrators have been unable to set up conference calls which included Ulrik Debo since his arrest in December 2019 and whilst the administrators continue to press the Director for updates both direct and via solicitors, no substantial detail has been provided.

As a general point, the Covid-19 pandemic [blah blah blah] the Director is stating that although potential investors have not completely withdrawn their interest in the various projects, there is little promotional activity currently being undertaken.

The administrators are at present committed to proceeding with the administration in order to support any commissions that are forthcoming from the debt funding platform.

Total fees currently incurred by the administrators (Smith & Williamson, also currently raking over London Capital & Finance and Blackmore Bonds) stand at £190,000, of which £82,000 has been collected. A further £51,000 has been incurred in other costs. £233,000 has been recovered so far.