Author: Phoenix

Bondreview.co.uk to be maintained by Safe or Scam

~ Phoenix

When I said farewell two months ago, my initial plan was to maintain the blog in a frozen state for a year, after which it would disappear off the air.

I have since had an offer from Safe or Scam to take over the domain and website, and have accepted. The transfer will take effect in the next few hours, after which my involvement with Bond Review will end.

Bond Review has always been until now a fully independent and disinterested source of coverage on the unregulated investment world, and I thought long and hard before accepting an offer from a commercial organisation, but the alternative was to allow the website to disappear after a year, after which the domain would have been available for anyone to jump on. I am grateful to Safe or Scam for ensuring that my coverage can remain as a useful resource to investors.

I may return to blogging one day but it won’t be under the “Brev” persona, so any posts on this website or under the name “Brev” after 23 July aren’t from me.

Stay sane.

-Brev (2017-2021)

Comments now closed

~ Phoenix

Slightly later than initially announced in my last post “Goodbye”, all articles have now been closed to comments.

I can continue to be contacted via the Contact link at the top of each page or via Twitter.

Thanks to all readers for their contributions.

Goodbye

~ Phoenix ~ 25 Comments

Regular readers will probably have noticed that the output of Bond Review has continued to drop recently.

In the first year of Bond Review I reviewed over 60 investment schemes that were being promoted to the public; in the past 12 months I’ve reviewed a third of that number.

Although there are still far too many high risk investment schemes being promoted with impunity to the general public by search engines and social media, there are signs that the tide has lessened somewhat. When Bond Review was founded, there was a constant stream of people signing up for consumer finance forums asking whether London Capital and Finance was a safe investment. That is no longer the case, at least not to nearly the same extent.

In 2017 minibonds were mostly ignored by the press other than very occasional articles warning investors of the risks (and sometimes promoting them). They were also, as covered here extensively, completely ignored by the FCA. That is certainly no longer the case, with the collapse of London Capital and Finance (along with lesser schemes) hitting the mainstream press and the subject of Parliamentary enquiries.

But the main reason I am bringing the blog to a close is that I simply don’t have the time any more. Maintaining the trickle of bi-weekly articles (with regular lapses) has often meant staying up past midnight (and drinking too much wine) simply because it was the only hour in the day available. I have a full-time job, a family, a sports club to get back up off the ground after being shut down during the pandemic, and the blog. Something has to give.

I remain proud of what Bond Review has achieved. I know for a fact that as a result of my reviews, millions of pounds whose owners could not afford to lose them have been saved from high-risk investment schemes which subsequently collapsed. I know this because the people that ran them told me so in the course of their legal threats.

All I have done for three and a half years is to post the facts, and nothing but the facts, about the risks of unregulated investments, so that investors can make their own minds up. At times this meant my coverage was open to charges of being “anodyne” or “mealy-mouthed”, but it was sticking to what was verifiable and in the public domain that allowed me to stand behind my coverage for this long.

I considered going public with my identity but have nothing to gain from doing so. At least three different people have been identified as Brev by various idiots posting spam online. None of them are me.

I originally called this article “Indefinite hiatus” but then I remembered how annoying it was when I was reading webcomics twenty years ago and authors would forever be going on “hiatuses” (hiati?) that left you forever wondering whether they’d come back. So no hiatus, just an unambiguous goodbye, and an end to three and a half years that has often been stressful, draining, fascinating, heartbreaking and (emotionally) rewarding in equal measure.

Thanks to all the readers who have read this far. In the early weeks of writing Bond Review I got excited whenever my pageview count went up by 1 (and even more excited when it wasn’t from me). For many weeks posting articles felt like shouting at the bins. The stats, comments and messages of support all helped keep me going for as long as I have.

A special thanks to everyone who donated. If anyone feels they have been shortchanged by the sudden cancellation, get in touch via the Contact link above and I will happily refund any previous donations to their source. The handful of recurring donations to Bond Review have been cancelled at my end.

A final credit goes to Oz, the writer behind the website BehindMLM.com, which was a huge inspiration for Bond Review. If there are any readers of both they will have noticed a few similarities of style which are partly homage and partly lack of imagination on my part. It showed that it was possible to shine a light on an under-covered part of the financial world and keep it going in the teeth of concerted and relentless opposition. How Oz has kept it going for a decade (with a much higher output than I ever had) is beyond me.

Comments on all articles will be closed in a week on June 1st. I will continue to pay the hosting bill to keep Bond Review up for another year. It will then close for good on 25 May 2022.

I can continue to be contacted via the contact link above.

Have you thrown in the towel due to legal action?

When I started Bond Review I knew I needed to be prepared to stand up for myself in court, or there was no point in writing articles on this subject in the first place. A total of 13 different investment schemes have made legal threats to me. None of them have gone to court. Until today I had (unless memory fails me) withdrawn one solitary article from publication: a report on Blackmore Bonds‘ brief sponsorship of the Kent Police rugby team.

So any suggestion that I have been intimidated into shutting down the blog is a perfectly reasonable guess but incorrect.

Nor have I been paid off. I have never (despite offers) accepted money to remove any article from Bond Review, and never will.

A number of articles have been pulled from view today because keeping them up for another year is not worth the time and money it would require. This should not be misinterpreted as an admission that anything in them was false. I cannot comment further. There are special circumstances and anyone who thinks I might be persuaded to pull other articles for no reason (before the website closes) should save their breath.

High Street Group calls crunch meeting with investors, attempts to delay repayment

High Street Group logo
~ Phoenix

This article below was written by the previous owner of bondreview in May 2021. It is being published because now that High Street GRP Ltd is in administration it will be interesting to see whether or not the prophecies came true. This article is 11 months old so it will obviously have been overtaken by events later in 2021.

Safe Or Scam has written two articles on the High Street GRP Ltd administration on its blog page. 

May 2021 Article

An article from Business Live reveals that High Street Group has called a meeting with creditors in an attempt to delay repayment of its bonds.

The meetings relate to 7 year bonds issued by High Street Group, which I believe are the ones issued with an interest rate that started at 12% per year and escalated to 22% in the 7th year. Bondholders had the option to redeem their bond at each anniversary.

12% fixed annual return (bonuses available from the 2nd year).

Flexible 1 – 7 year investment period.

All funds secured against significant unencumbered assets.

Debenture and Corporate Guarantee held by an FCA regulated Security Trustee.

No exit fees or hidden costs such as stamp duty, legal fees, service charge, ground rent and general maintenance.

Exit option every 12 months.

The money will be provided for acquisitions for the High Street Group – thehighstreetgroup.com/ – funds are used for multiple projects, this is yet another security in place as you are backed by all the assets values, not just one.

2019 third party introducer promotion for High Street Group’s unregulated 7 year bonds. Typos as per the original.

According to Business Live, High Street Group is seeking to renege on that “exit option” to redeem the bond at each anniversary. It warns that if investors do not agree, the company could collapse.

It is asking investors to scrap a condition that allows them to redeem investment before the end of a seven-year bond, and warns that if it fails to get approval, it could have to review the company’s ability to continue as a ‘going concern’.

I believe these particular 12%-22%pa terms were first offered by HSG in 2019. That would mean investors are effectively being asked to defer the right to repayment from 2020 to 2026 – a dramatic change to what investors signed up for. We can call the right to redeem in 2020 “early” redemption, despite its introducers using the word “flexible”, but in the end investors either have the right to demand their money back or they don’t.

Naturally, even if HSG’s creditors do all defer their right to 2026, there remains the same inherent risk of up to 100% loss that exists with any loan to an unregulated, unlisted company, only with five extra years of waiting.

The Business Live article refers to investors as “shareholders” – but as far as I’m aware the investments in question were structured as loans, not shares. Indeed, the promotion above specifically referred to “loan notes” and to a “debenture [another name for a loan] and corporate guarantee”.

According to High Street Group, 50% of investors have already agreed to the new terms.

It is however important to note that a majority of High Street Group’s creditors agreeing to defer payment has, in itself, no effect on the right of other creditors to enforce their debt.

For creditors to be able to vote on a renegotiation which affects all creditors generally requires a formal insolvency procedure, such as a Company Voluntary Arrangement or administration. All such options involve the apppointment of insolvency practitioners. High Street Group as a whole continues to trade and is not in administration (though a subsidiary, High Street Rooftop, is).

So High Street Group can call as many meetings with its creditors as it likes, but any of its creditors whose loans have fallen due will retain that right, unless a) they individually give it up or b) the company enters a formal insolvency proceeding. Unless there’s something very specific in the terms of the loans giving the company the right to change them.

In attempting to persuade investors to give up their right to flexible redemption on the bond anniversary, High Street Group attempts to compare itself with mainstream regulated commercial property funds.

This measure is not unusual, in fact during the pandemic the FCA gave permission for investment firms to pause redemptions in order to maintain the viability of the sector.

What HSG are referring to here are open-ended commercial property funds which, in benign circumstances, allow investors to redeem their investment on a daily basis (as it stands; the FCA is running a consultation into whether they should have a notice period). This is a far cry from HSG’s unregulated bonds which would only be redeemable annually even in the best of times.

Clearly, a fund holding illiquid commercial properties cannot meet sale requests within 24 hours if more investors want to get their money out than the fund has in cash in the bank. When this happens, open-ended commercial property funds suspend withdrawals, typically for months to give themselves time to sell properties without a fire sale.

They did not, as HSG claim, require FCA permission to do so. In reality, it is mandatory for an open-ended commercial property to fund when it has more withdrawal requests than cash on hand. This not only happened during the 2020 coronavirus crash, but in the 2016 Brexit crash and the 2007 commercial property crash before that. It is an inherent and normal feature of investing in an illiquid asset via a fund that commits to allowing you to cash out at the Net Asset Value of the properties. (In contrast to “closed-ended” funds, such as Real Estate Investment Trusts (REITs), where you can usually cash out via the stock exchange even in times of crisis, but only if you accept a substantial discount to the Net Asset Value.)

HSG’s attempt to compare itself with mainstream commercial property funds is not flattering to HSG. Most open-ended commercial property funds, having universally closed en masse during lockdown, have since re-opened. Some have already recovered the falls in value during the pandemic. Of the two I can name that remain closed, one plans to open by the end of June (Aegon) and another has announced that it will be wound up (Aviva) – but has said it intends to return 40% of the fund to investors by July, with the rest to follow within a couple of years as it sells properties.

Which, while highly disappointing to Aviva investors, is more transparent than the 5-year timeframe for any returns that HSG investors are looking at, with the inherent risk of 100% loss remaining that comes with any loan to an unregulated company.

But mainstream regulated funds don’t promise returns of 22% per year if you stick with them for 7 years (with an average return of c. 17%pa over the 7 years), so here we are.

“Accounts due soon”

The Business Live article understates High Street Group’s difficulties in complying with the law when it refers to “a number of accounts being filed late”. It later states inaccurately “High Street Group’s 2019 accounts are five months overdue”. The December 2018 and December 2019 accounts for High Street Commercial Finance, one of the companies that has raised money from bondholders, have never been filed at time of writing (not filed is different from filed late). The December 2018 accounts are a year and a half overdue. The holding company, High Street Grp, is five months overdue with its December 2019 accounts (having finally filed the December 2018 accounts, which received an adverse opinion from its auditors). From the perspective of investors who loaned it their money, High Street Commercial Finance Ltd = High Street Group. HSCF is also five months overdue with its latest confirmation statement (details of who owns the company).

According to Business Live “it is believed publication [of the accounts] is due soon”. How soon and who believes this is not specified.

High Street Group continues to blame the Covid pandemic for its issues.

The company said in February that it had suffered difficulties after the Financial Conduct Authority (FCA) allowed investment groups to suspend lending during the coronavirus pandemic.

This overlooks the fact that High Street Group’s issues with filing accounts started in September 2019, when it fell overdue with the 2018 accounts for High Street Commercial Finance, when Covid was just a twinkle in a pangolin’s eye.

There are a number of comments under my original review referring to problems obtaining repayment from HSG. The first of those explicitly referring to HSG delaying repayment was in November 2019.

Some months before that, investors had referred to being offered repayment in shares rather than cash. A company confident in its growth prospects (which is certainly the case for HSG based on its investment literature) only offers to repay investors in shares if it is short of cash. Otherwise the shareholders would keep their shares and the rising value of them for themselves. Again, all this was months before Covid hit the UK in earnest.

According to the Business Live article, High Street Group has announced a £172 million deal with the Edmond de Rothschild Real Estate Investment Management group.

No details are provided in the article as to how much of these funds will be available to repay HSG bondholders.

Buy2LetCars investors invested in cars which didn’t exist, administrators confirm

buy2letcars logo
~ Phoenix ~ 8 Comments

The administrators of Buy2LetCars (comprising Raedex Consortium aka Wheels4Sure, Buy 2 Let Cars and Rent 2 Own Cars) have released their initial report.

The report reveals that of out of every 6 cars invested in by Buy2LetCars investors, 5 didn’t exist.

The total number of known loan agreements is 3,609, relating to 834 investors.. However, the number of vehicles held by the Group is 596, i.e. there are more loans than vehicles.

The prospect held out by Buy2LetCars was always that each investor would be investing in an individual car which would be leased out and used to pay their return, and could be sold if the lessee stopped paying.

A funder will simply loan us a lump sum of capital, and with that money we will purchase a brand new car and then lease it out through our sister company Wheels4Sure.

We also ensure your asset is protected by using state of the art tracking and immobilisation technology inside every car.

Buy2LetCars website in January 2021

According to the administrators, it seems that some cars were allocated to more than one investor. Other investors had no car allocated to them at all.

The Joint Administrators are undertaking an exercise to review B2L’s records and allocate each investment to a category based on the signed documentation within the records. This exercise has also revealed that some vehicle registration numbers have been referred to in more than one loan agreement.

Significant amounts of time have been spent on this exercise and it is clear therefore that a large proportion of investors do not have a vehicle allocated to their investment.

Investors who were unlucky enough to hand their money to Buy2LetCars after the FCA had already effectively shut down the scheme by removing their permission to lease new vehicles (although it turns out that this was only a symbolic gesture, as Buy2LetCars wasn’t leasing new vehicles for 5 out of 6 investments anyway) have “queried the treatment of those receipts” (i.e. asked if their money is ringfenced or lumped in with everyone else’s). The administrators will be taking legal advice on this point.

Recovery prospects

A total of £48 million was taken in from Buy2LetCars investors. (A small amount is also owed by B2L to the taxpayer and associated companies.)

£902,000 in cash has been recovered so far. The administrators expect to realise £4.2 million from selling the vehicles and around £400k from the lessees.

The B2L entity to which investors loaned money is in turn owed £31.3 million by Rent 2 Own Cars, also part of the administration. £24m is in turn owed by Raedex to Rent 2 Own Cars. (The administrators’ statements of affairs contain a typo in which R2O is said to be owed £24m by itself. The earlier summary states the correct position.) Prospects of a return from these intercompany debts are currently unclear.

The directors of Buy2LetCars (Reginald Larry-Cole and Scott Martin) owe a total of £804,000 to the group in directors’ loans. The administrators say it is unclear how much will be recovered.

The administrators are also trying to establish who owns a Rolls-Royce that somebody was apparently swanking around in. Even though a business with a couple of million in turnover at most and continual losses doesn’t exactly scream “Rolls Royce lifestyle”.

No figure has yet been put by the administrators on potential recoveries for investors.

Although the investment scheme was unregulated, Raedex was regulated by the FCA, as it had to be in order to lease vehicles to customers. The Financial Services Compensation Scheme is remaining tight-lipped on whether this is enough to dump yet another bill on the general public for the UK regulatory system’s failure to stop unregulated investment schemes being promoted to them. Following the recent bills for London Capital and Finance, Basset & Gold etc etc etc.

As at the date of the 2020 balance sheet, £40.4 million had been lent by investors, on which Buy2LetCars committed to pay 7 – 11%. That required B2LC to generate at least £2.8 million in annual earnings on top of the cost of running the business and bad debts, if it was to meet its obligations.

In that year, Raedex, which was the company responsible for leasing out the vehicles, generated a turnover of just £1.5 million (before any costs had been deducted). But this is hardly a surprise at this point given Buy2LetCars had only 596 cars across 3,609 investors.

This was naturally not disclosed to investors. Despite running an investment scheme promoted extensively to the public, and claiming “we are fully transparent about our business” on its website pitch to investors, UK company law allowed Buy2LetCars to withhold its profit and loss accounts from Companies House using “small company” exemptions. They have only now been published in the administrators’ report.

The administrators note that a Serious Fraud Office investigation is underway but that this is separate to their own attempts to maximise returns for creditors.

Astute Capital hit by FCA warning, still being promoted on Facebook

Astute Capital logo
~ Phoenix ~ 8 Comments

The Financial Conduct Authority has posted a warning about Astute Capital, whose bonds were reviewed here in March 2019. A search for Astute Capital on the FCA register now brings up:

This is an unauthorised firm that may be providing financial services or products in the UK without our permission. If you deal with unauthorised firms you will have less protection if things go wrong.

along with details of what to do if investors think they have been scammed.

What to do if you think you’ve been scammed?

It can be easy to fall for a scam – the people that run them are skilled at persuading their targets to part with money. If you think you have been contacted about a scam or have paid money to fraudsters there are steps you can take to protect yourself.

Exactly what regulated financial services the FCA think Astute Capital is carrying out is currently unclear. Astute Capital’s main business is commercial lending, which does not require authorisation for the FCA. Astute Capital has raised money from investors via bonds listed on the Euronext, Vienna and Frankfurt Stock Exchanges. That does not require authorisation from the FCA either.

I was unable to find a current trading price for Astute Capital bonds on any of these exchanges, suggesting the bonds remain illiquid.

In 2019 Astute Capital promoted its bonds directly to the public via Google ads.

Astute Capital Google ad

That did require authoristion from the FCA – and as Astute didn’t have that itself, it would have needed a third party to sign off the ads (Section 21 authorisation). But that was back in 2019 so it seems unlikely that it has anything to do with the FCA’s warning. But it took them 5 years to issue a warning against Asset Life plc so who knows.

In interim accounts for 2019, Astute Capital stated that it had terminated all relationships with unregulated introducers.

Yeah, totally can’t read that at all.

Despite this, Astute Capital is being promoted on Facebook by a third party unregulated introducer called “IPB”, in bizarre ads which sort-of but-don’t-really-at-all obscure Astute’s name.

Who is behind IPB is unclear as no ownership details are provided on its Facebook page. Similarly unclear is why IPB are promoting Astute after they claimed to have stopped taking money via introducers.

Astute Capital funds are on-lent to Astute Capital Advisors Limited, which recently published accounts for March 2020, showing it to be £6.9 million in the red with a loss of £3.5 million. The company stated that it believed the company was nonetheless a going concern and attributed its losses to the young age of the company.

In Astute Capital plc’s accounts, the directors stated that they expect ACA to generate returns of at least 30% per year, plus profit shares.

The average forecasted returns for ACA on its loan book is circa 30% per annum, plus profit shares structured by way of minimum earning written in the loan documents and should be taken into consideration when assessing ACA alongside interest earnings.

As of March 2020 Astute Capital plc had taken in £20.2 million of investor money, according to its published accounts.

Astute Capital previously stated that it was hoping to obtain FCA registration in 2020. Instead all the company has managed to obtain from the FCA is a public warning.

Is it time for a “ScamSmart” leaflet for first-time investors?

~ Phoenix ~ 6 Comments

With the taxpayer still reeling from the £170m+ bill that has fallen on them from the London Capital and Finance scandal, is it time to start issuing a “ScamSmart” leaflet to first-time investors who’ve just come into large lump sums?

During the last wave of “pension liberation” scams in the early 2010s, hundreds of millions of pounds were lost by investors who transferred their pensions to fraudsters who promised fabulous returns and “loopholes” that would allow the investor to release their money earlier and in larger quantities than the rules allowed.

Although pension fraud remains rife, the scale of the problem was dampened by in a number of ways:

  • HMRC no longer allowing anyone to set up a pension scheme if they sent in two tokens from a breakfast cereal packet
  • George Osborne’s “pension freedoms”, which dramatically reduced the appeal of “pension liberation”
  • “ScamSmart” leaflets were issued to anyone who might be considering a transfer, with a distinctive scorpion cover and clear warnings about what a scam might look like.

If people making a decision on what to do with a large pension fund should be given a leaflet to try and stop them doing something really foolish with it, could the same be done for people who’ve received a large non-pension sum of money into their accounts?

A recurring theme in the fallout of London Capital and Finance was the stories of people who had received a large sum of money, larger than they had ever handled before in their life; typically inheritance, pension commencement lump sums, or downsizing proceeds, and invested the lot in LCF. Often having thought they had done the right thing by checking it was an FCA-regulated firm. It is easy to say they should have sought independent regulated financial advice, especially as they should have. But you don’t know what you don’t know.

It should not be too impractical to draw up rules for solicitors, banks and pension companies that state that if a client is to be paid a sum of money larger than £100,000, and that the company handling the money

  • is not aware that the client intends to immediately use the money [e.g. buying another house with it]
  • and does not have evidence on file that the money is a relatively modest part of the client’s free assets, say 25% or less

…then a one or two page leaflet should be issued before releasing the money warning them of how easy it is to lose a large sum of money as a first-time investor. The leaflet could run along the following lines:

  1. Don’t use social media or Google to look for investments.
  2. Consider talking to a regulated, independent financial adviser on how to use the money.
  3. A large sum of money kept in cash will lose value to inflation over time. Mainstream investments go up and down but should only lose money if they are cashed in during a fall, or not properly diversified, or use gearing.
  4. Don’t use social media or Google to look for investments.
  5. Be suspicious of any investment that promises returns that seem too good to be true. Beware any “cash” or “guaranteed” account that pays even slightly more than normal bank accounts. Beware any investment that is not diversified across the world’s major stockmarkets.
  6. Don’t use social media or Google to look for investments.

I’m normally the first person to scoff at anyone who suggests that the solution to a problem is to issue a leaflet and tick a box. But I’m not proposing a “ScamSmart” leaflet on the grounds that it will stop scams; just that it might stop a few investors losing their money.

It will also force us to confront the reality that someone who has just received a sum of money larger than they’ve ever handled before is being thrown into a pool of sharks blindfolded. The first step to solving a problem is to admit that we have a problem.

Crisis? What crisis?

Emphasising the need for solutions to the scam crisis that don’t involve Parliament, the Government recently rejected widespread calls to take action against promotion of investment scams by search engines and social media companies.

The Government’s “Online Harms Bill” was originally set to address racism, child abuse and romance scams.

An amendment by MP Stephen Timms was brought forward that would have brought investment scams within the scope of the Bill, including powers to fine Google and other search engines if they failed to tackle investment scams.

The amendment received a broad coalition of support including FCA head Nikhil Rathi, the CEO of advice and asset management giant Quilter, the Financial Services Compensation Scheme (FSCS), TV’s Martin Lewis and the Money and Mental Health Institute.

But despite positive noises being made by the Government, the Queen’s Speech made no mention of financial harm when introducing the bill.

£20 million of investors’ money (which has now become taxpayers’ money) was paid to Google for promoting London Capital and Finance, with another £6 million paid to other marketing platforms. As Google did nothing wrong by accepting money from LCF’s unregulated introducers, it is almost certain that money will ever be recovered by the general public, who were recently presented with the final bill for bailing out LCF almost in full.

The amount of money lost into scams would collapse dramatically overnight if search engines were subject to a fine (or, even better, held liable for investor losses) if they promoted any investment to UK investors that does not have authorisation from the Financial Conduct Authority.

Google would probably say that it is impractical, given the number of ads placed via its system, to vet every single one that mentions investment. However that is exactly what they said for years to justify why YouTube was filled with copyrighted material including virtually every popular film and TV show available to download in full (in 10 minute chunks). When the possibility of being held liable for copyrighted content become imminent, a technological solution was suddenly and magically found.

Given that banks can now be held liable for frauds in which they have done no more than send money to where their customer asked them to send it, it makes little sense to say we can’t expect Google to check whether someone advertising an investment scheme can actually do it legally – a burden no greater than expecting Google not to bring up an advert for your local drug dealer if you type in “cocaine”.

But that is by the by as the Government apparently sees no need. Scam epidemic? What epidemic?

Park First reportedly close to deal with FCA over illegal investment scheme allegations

~ Phoenix ~ 13 Comments

According to reports in The Times, the FCA is close to a settlement with Park First and owner Toby Whittaker over the £230 million collapse of the scheme.

In late 2017 (not 2016 as the linked article has it), in an uncharacteristic burst of activity, the FCA shut the scheme down, alleging that in its current form it constituted an illegal collective investment scheme. Park First offered a “guaranteed yield” of 8% in the first two years, rising to 10% and 12% thereafter, mirroring the returns on offer from sister scheme Store First (which was Park First with self-storage sheds instead of airport parking spaces).

Investors were given the option of either switching to a different scheme which offered only 2% plus variable dividends, or getting their money back. Unsurprisingly, nearly all investors opted for the latter. By this point Park First no longer had the money. After a desultory attempt to flog the new 2% scheme to Russian investors (who were falsely told that the original investors had been repaid), Park First collapsed into administration.

Existing investors were offered a choice: switch to a new interaction scheme or sell parking lots to the company, having fully returned their money.
?
The company fulfilled its obligations to investors who left in full.
?
Investors who choose to stay already receive rental income and dividends.

Park First’s Russian Instagram page in March 2019, three months before it collapsed into administration (via Google Translate)

Whittaker has already (apparently) successfully walked away from the collapse of Park First’s sister scheme, Store First. In late 2019 the Official Receiver sold the freehold, associated assets and goodwill of Store First’s storage centres to Toby Whittaker’s wife for an undisclosed sum (which under UK matrimonial law is the same thing as selling them to Toby Whittaker himself). It said in a statement that this represented “the best outcome for creditors”. No returns were reportedly received by Store First investors, although they were given the ability to surrender the pods and their ongoing liability for business rates for free.

Whether Park First investors fare any better in any upcoming settlement remains to be seen. The FCA for its part says

In this complex case we have taken civil enforcement action alleging serious breaches of the Financial Services and Markets Act,’ a spokesperson said.

We are committed to ensuring that those running the firms account for their misconduct, including paying compensation to victims.

Krono Partners update: nothing to update

Krono Partners logo
~ Phoenix ~ 3 Comments

The administrators of Krono Partners, Smith & Williamson, have filed their latest six-monthly update.

The preceding twelve months brought the revelation that a significant Krono player, Ulrik Debo, had been charged with securities fraud in the USA.

Criminal proceedings by the Securities and Exchange Commission are ongoing.

There is however no update on returns from the “Company Y” loan platform, on which the administrators are pinning their hopes of recoveries.

The director has indicated that any return from this asset is currently remote.

Nor is there any update on the ragbag of other assets held by Krono.

There are no further developments to report on the following assets: Unlisted shares; Other debtors; Bank accounts; Krono Administration Limited; Listed shares; Micro loans; Intellectual property

A breakdown of timecosts shows that in the last six months, a total of 18 human-hours has been spent by Smith and Williamson on the Krono administration, of which the largest item, taking 8 hours, was compiling the six-monthly report.

Fielding investor enquiries accounted for another 3. Compliance and “general review” took up the bulk of the remaining 7.

This backs up the impression that the administrator’s plan is to grab a deckchair and a) wait for the outcome of the US case against Debo (although how it directly affects Krono Partners is as yet unclear, as Krono was not mentioned in the SEC case) and b) continue waiting for “Company Y” to generate some returns.

Blackmore Global under investigation by Isle of Man regulators

Blackmore logo 2019
~ Phoenix ~ 10 Comments

Blackmore Global, the sister investment scheme to the UK minibond that collapsed with £46 million of potential losses, is being investigated for potentially running an illegal collective investment scheme.

Blackmore Global was established a few years before Blackmore Bonds. It is, on the surface, an unregulated investment scheme consisting of a closed-ended company registered in the Isle of Man.

The BBC revealed in 2018 that a number of UK pension investors had been missold in transferring their pension funds into Blackmore Global, an inherently high risk unregulated investment. The linked article has been suppressed by Google – along with its BBC source – due to legal action by Blackmore.

The articles remain suppressed despite the fact that Blackmore has never proved or even attempted to prove in a court of law that any part of my article is untrue, and the same applies (so far as I am aware) to the BBC’s.

Investors in Blackmore Global were locked in to the fund for 10 years. Blackmore Global was incorporated in September 2013 and the earliest any Blackmore Global investors will be able to cash out of the fund is therefore September 2023.

The current status of investments in Blackmore Global is unknown as it does not publish regular independently audited accounts.

After seven and a half years of operation, the Isle of Man Financial Services Authority has now accused Blackmore Global of running an unregulated investment scheme.

The IOMFSA went public with its accusations because it “considers it is desirable in the public interest to publish the information”.

The IOMFSA’s accusation is based on the following:

8.1 When Blackmore was established it availed of an exemption provided in the Collective Investment Schemes (Definition) Order 2008 (the “Order”). The relevant exemption in the Order was at paragraph 4: “…and no other body corporate other than an open-ended investment company, shall be regarded as constituting a collective investment scheme.

8.4 The Offering Document (and Article 12 of the Articles of Association) provides that Blackmore may only repurchase shares in exceptional circumstances subject to strict criteria:

“12.2 Unless shares are expressed to be redeemable, the Company may only purchase, redeem or otherwise acquire them pursuant to –

(a) an offer to all shareholders which if accepted would leave the relative rights of the Shareholders unaffected and which affords each shareholder a period of not less than 14 days within which to accept the offer; or

(b) an offer to one or more shareholders to which all shareholders have consented in writing; or

(c) an offer to one or more shareholders in respect of which the Directors have passed

a resolution stating that in their opinion the transaction benefits the remaining shareholders and the terms of the offer are fair and reasonable to the company and the remaining shareholders”.

Or to translate from Manks Gaelic:

Neither my sister nor I operate a collective investment scheme. We like them, but we don’t operate them. We’re from the Isle of Man.

Blackmore Global was only able to operate as an unregulated, unlisted investment scheme on the basis it was a closed-ended scheme, meaning that to join an existing investor had to sell you their shares, and to exit you had to find a new investor to sell you their shares. Isle of Man securities law recognises that this is inherently less likely to be flogged to the public than an open-ended company which can generate new shares for any investor who wants to join and extinguish them for any investor who wants to cash out.

It is technically possible for a closed-ended investment company to buy its own shares off the shareholders using cash in the company. Do this often enough, however, and you start to behave like an open-ended fund.

The IOMFSA alleges this is what Blackmore Global was doing.

8.5 The Authority became aware that between March 2015 and May 2019 there had been regular and substantial redemptions made out of Blackmore.

8.6 The Authority does not consider that the number and nature of the redemptions processed and made were exceptional in nature, or that Blackmore was able to evidence that the transactions benefited the remaining shareholders and that the terms of offers were fair and reasonable to the remaining shareholders.

The extent to which these regular and substantial redemptions made out of Blackmore has to do with investors like those featured in the BBC investigation being allowed to cash out prior to the ten-year lock-in period ending is unknown. In part due to its own lack of disclosure.

Also unknown as yet is whether any of these redemptions were made by Blackmore directors or controlling persons.

The IOMFSA is now considering “appropriate next steps”.