FCA knew about misselling of Blackmore Bonds three years before collapse

April 29, 2020June 29, 2020 ~ Phoenix ~ 17 Comments

The collapse of Blackmore Bonds has once again laid bare the Financial Conduct Authority’s institutional contempt for its objective of consumer protection.

Paul Carlier, an independent consultant known for blowing the whistle on dodgy FX dealings at Lloyds, contacted the FCA on March 2017 to warn them that Blackmore Bonds’ high-risk investments were being missold by an unregulated introducer named Amyma.

They occupy the office next to us and the glass partition means we hear everything they say and do.

In a nutshell Boiler Room. […] They are pushing all manner of these bonds to pensioners citing them as “guaranteed by one of the worlds biggest banks”. […] “Everything is guaranteed” “I’ll put you down as a sophisticated investor”.

[…] And their phone rarely ever rings and assume from the fact that they have to ask people’s names that cold calling in some form is involved.

Carlier received a reply from the FCA to say that his report would be passed to “the relevant areas to consider”. Carlier replied

Please stress to whomever you pass the Amyma info to that pensioners are clearly being targeted.

It’s not just a Boiler shop issue but activity related to misleading pensioners, vulnerable under the new rules.

Carlier continued to press the FCA on the subject over the following years, but the FCA refused to engage with him regarding Blackmore Bond or Amyma.

Carlier was not the only one to warn the FCA long before Blackmore’s collapse. I can reveal that I also contacted the FCA to warn them of the same thing, a year after Carlier did, in early 2018.

I highlighted to the FCA a) the misleading way Blackmore was advertising its bond via social media, with terms like “Income Certainty” “Knowing how to invest your savings doesn’t have to be difficult” etc. And b) how Trustpilot laid bare how many Blackmore investors clearly did not qualify as high-net-worth or sophisticated.

Like Carlier, I never heard anything back beyond a boilerplate acknowledgement.

So what did the FCA do?

Amyma has also marketed Asset Life plc (now insolvent) and Westway Holdings (trading but in default of its obligations to investors).

The only action taken by the FCA in regard to Amyma that is in the public domain was to give it FCA authorisation, via the firm Equity for Growth (Securities) Limited. Amyma Ltd was an Appointed Representative of EfGS from July 2018 to September 2019. This means that the FCA did not authorise Amyma directly; EfGS was ultimately responsible for Amyma’s contact during that period. Why Amyma lost its appointed rep status in 2019 is not publicly known.

In 2019 Blackmore rowed back on its promotional activity following the collapse of London Capital and Finance, first closing to new business and then re-opening to non-UK investment only (despite there being no legal prohibition on it accepting money from within the UK).

However, no action was actually taken by the FCA against Blackmore that is in the public domain. Which given that Blackmore’s bonds were promoted to the general public is the same thing as no action being taken.

Regardless of what happened in the year leading up to Blackmore’s collapse, Blackmore was able to continue misleadingly marketing its bonds via its own social media and via third parties for years after the FCA was made aware of it.

Institutional contempt

Former FCA head and now Bank of England governor Andrew Bailey admitted in June 2019 that the FCA was aware of the systematic misselling of LCF bonds long before it intervened in December 2018. That it did the same with Blackmore is not a surprise.

Why does the FCA focus so much of its attention on issues such as the minutiae of “worst regulation ever” Mifid II, finger-wagging over easy access interest rates, hanging out with Arnold Schwarzenegger and chin-wagging conferences about excellent sheep; while over a billion pounds is lost on the UK on systematically missold unregulated investments, with far-reaching consequences to the wider economy and society?

This is not a rhetorical question.

The tea within the financial industry is that the FCA takes the view that banks underpaying their depositors by £1 billion is more important than people losing £500 million worth of life savings in scams or unregulated investments.

This comes from second-hand reports of private conversations with FCA officials, and the FCA will never verify this in public, so readers can take it or leave it. Personally I take it, because it is a model which consistently explains the pattern of FCA behaviour over a period of many years.

This “£1 billion of uncompetitive interest rates is more important than £500m of lost life savings” credo is of course complete nonsense.

Studies have consistently shown that the stress and misery caused by losing your life savings is comparable to that of losing a limb or a loved one.

By contrast, customers being overcharged for insurance or receiving 0.5%pa less than the best-buy rate causes precisely no misery whatsoever. If it caused them misery they would switch.

If the police took this attitude to crime prevention and prosecution, shoplifting would be priortised over murder on the grounds that £100 stolen from a shop is more important than £50 worth of clothing getting covered in the victim’s blood.

The idea that some banks paying less interest than others is more important than scams because the first involves more money, is a classic example of starting from the conclusion you want and then finding a reason to justify it.

The reason the FCA pays virtually no attention to the loss of hundreds of millions worth of savings in inappriorate high risk unregulated investments is because they view it as beneath them.

The FCA would rather be a vicar than a sheriff. Regulated businesses serve the FCA tea and biscuits in nice London offices and nod attentively when it lectures them about the font they use to disclose their charges. The FCA would rather eat their biscuits than drive up to grotty offices in Bournemouth and Bolton to serve cease and desist notices. But the latter is where action is needed.

We have gone way beyond “Why doesn’t the FCA do something?” The answer to that is the same as when the frog asked the scorpion “What did you do that for?” The question is now “When will Parliament do something about the FCA?”

The FCA has now been leaderless for four months and counting.

The last time the FCA was under interim leadership, London Capital and Finance obtained FCA authorisation, allowing the marketing of its bonds to go into overdrive.

I was tempted to conclude this article “Round and round we go” and call it a morning, but the reality is that the cycle can be broken. We also know how it can be broken.All investment security offerings registered with the FCA, as has been the case in the USA for almost a century, and a top-down reform of the FCA to bring about real and urgently needed cultural change.

It is now up to the Government to choose whether to break the cycle or throw future pensioners and other vulnerable consumers on the bonfire.

Footnote – Philip Nunn speaks – or doesn’t

Blackmore director and co-owner Philip Nunn remains active on Twitter, but appears to be pretending his most famous company doesn’t exist.

Since Blackmore collapsed into administration, Nunn has not had a word to say to his stricken investors, instead restricting himself to offering his services for raising investment in the cryptocurrency industry, and banal nonsense along the lines of “2018 – Everyone is a Bitcoin seller. 2020 – Everyone is a PPE seller.”

Since October 2018 (as far back as I could go), Nunn’s Twitter feed barely mentions Blackmore at all.

Also notable is that in a puff piece in 2018, Philip Nunn was still being introduced as “CEO of Wealth Chain Group and The Blackmore Group”. However, by 2019 Nunn was being mentioned in puff pieces only as CEO of Wealth Chain Group, with no mention of Blackmore.

This is odd because Wealth Chain Group is an obscure one-man band. (A one-man band that owes money to Blackmore companies, according to its 2018 accounts; its 2019 accounts are overdue.)

If you were the owner of two businesses, one a £45 million property firm, and the other an obscure one-man band, why wouldn’t you identify yourself first and foremost as head honcho of the property firm? Especially in 2019, long before the property firm collapsed, when it was still telling everyone that it was on doing great and on course to meet all payments to investors?

Patrick McCreesh by contrast has not updated his Twitter feed since May 2018. Until that point his Twitter activity mostly consisted of retweeted and self-penned Blackmore PR announcements.

The FCA is probably hoping that everyone forgets Blackmore existed as well.

Breaking: Blackmore Bonds collapses into administration

April 23, 2020April 23, 2020 ~ Phoenix ~ 24 Comments

After months of delayed and missing payments and failure to file legally-required accounts, Blackmore Bonds is finally to be taken out back and put out of investors’ misery.

Administrators Duff and Phelps have been appointed by a security trustee (presumably Oak Fund Services (Guernsey) Limited), according to IFA trade rag Money Marketing. The news is little surprise as D&P were originally approached by Blackmore investors in January, seeking answers after months of delayed and missing interest payments.

Duff and Phelps are experienced in winding up investment schemes; they are currently raking over the ashes of collapsed care home scheme Carlauren and were also administrators of one of the biggest of the previous wave of investment scheme collapses, the Connaught Income Fund which collapsed in 2012 causing £118m in investor losses.

I reviewed Blackmore’s bonds in December 2017 and concluded that, despite Blackmore’s claiming to offer “Simple, fixed-rate returns with income certainty” and a “Capital Protection Scheme” backed by an obscure American insurer, the bonds were extremely high risk with an inherent possibility of up to 100% loss.

A year in the collapse of an unregulated investment scheme

In March 2019 Blackmore claimed to be “entirely on track” with return on capital employed rates of 54%.

Our business model is entirely on track and current return on capital employed averages 54 per cent. This has been verified by reputable independent surveying professionals. The first bond maturities are due at the end of 2020 and will be paid in full.

However, at around the same time it amended its website to include a warning that if new investments into Blackmore dried up, existing investors might lose some or all of their money.

There can be no guarantee of investor appetite for the Bonds to the extent predicted by the Company or, indeed, at all. In such circumstances investors may lose some or all of their investment.

Only four months later in July 2019 Blackmore defaulted on its first interest payments, although that money was eventually paid. From October onwards payments to investors dried up entirely.

Blackmore’s bonds were promoted by Surge Financial, the same marketing company as London Capital & Finance which collapsed at the beginning of last year. Blackmore paid 20% of investors’ money to Surge as commission. (Money Marketing says 25% but a belated amendment to Blackmore’s website, and its own accounts, suggest 20%.)

When London Capital and Finance collapsed in early 2019, Blackmore briefly replaced LCF on promotional websites linked to the Surge group, which coincided with a spike in traffic to Blackmore’s website.

Blackmore briefly claimed on its website to be the proud sponsor of the Kent Police rugby team, but withdrew that claim in early 2018. Kent Police said in 2018 that they agreed to accept sponsorship from Surge Financial, but withdrew from the sponsorship arrangement after Surge asked them to change the sponsor to Blackmore instead.

Blackmore also runs an offshore investment fund, Blackmore Global, which has been the subject of complaints from investors whose pensions were transferred into the fund. How the fund is performing is unknown as Blackmore Global does not release performance updates to the public (and, as an unregulated private business, has no obligation to).

Administrator Geoff Bouchier says

There has been concern regarding the company’s affairs for several months so it will be a relief for bondholders that independent professionals have now been appointed to the company.

“Relief” is not how I would describe it, but the announcement of the administration will at least begin the process of closure for Blackmore investors.

How do I get my money back from Blackmore?

If you were advised to invest in Blackmore Bonds by an FCA-regulated adviser, or invested via an FCA-regulated SIPP company without regulated advice, you may be able to recover your money by making a formal complaint to the FCA-regulated company.

If the company refuses to provide compensation, the complaint can be taken to the Financial Ombudsman, which can order compensation up to a defined limit. If the company is unable to pay, you would be covered by the Financial Services Compensation Scheme up to £85,000 per person (for defaults after 1 April 2019).

Investors should avoid Claims Management Companies (CMCs) as they are unnecessary (the FOS and FSCS process is slow but straightforward), often have a lower success rate than direct complaints, and charge eye-watering fees.

If the above does not apply the standard procedure is to write off the investment and treat any recovery as a bonus.

If you invested in Blackmore Bonds, you should be on your guard against anyone contacting you and telling you that they can recover your money. It is highly likely that you will be targeted by fraud recovery fraud. If anyone asks you to pay “legal fees” or “liquidation fees” to release your money it is almost certainly a scam.

Were Basset & Gold bonds risk-free after all?

April 14, 2020April 13, 2020 ~ Phoenix ~ 4 Comments

A couple of weeks ago West Ham sponsor Basset & Gold (reviewed here in December 2017) collapsed into administration.

So far so normal. Unregulated high risk investment fails, news at 11.

What was unusual about Basset & Gold is that back in 2018 at least, they were promoting their bonds while explicitly holding out that investors might be compensated by the FSCS if things went sour – on the basis of misselling.

From Basset & Gold’s Facebook page in March 2018, since deleted. [sic]

The FSCS confirmed on 1 April that investors can make a claim for misselling if they were sold their bonds via Basset & Gold’s FCA-regulated company.

Although Basset & Gold Plc has also entered administration, FSCS is unlikely to be able to pay compensation based purely on Basset & Gold Plc’s failure to repay the bonds, as issuing bonds is not normally a regulated activity.

For FSCS to be able to pay compensation, the customer must have been mis-sold their bonds, for example, because they relied on a misleading statement about how Basset & Gold Plc was investing their money.

How many Basset & Gold investors were missold the bonds? The Financial Conduct Authority suggests it’s quite a lot.

The FSCS has determined that many investors have a good prospect of claiming compensation. […]

We had concerns around the accuracy and fairness of B&G plc’s financial promotions of the mini bonds.

As a result, B&G Finance made improvements to its advertising in December 2018 and wrote to all bond holders in January 2019 clarifying that B&G has used ‘the vast majority of Bond proceeds to finance a large facility agreement with an FCA-regulated short-term consumer lender’.

No further bonds were issued to retail investors from May 2019.

In short, the FCA was concerned that B&G plc was misselling Basset & Gold bonds until May 2019. So anyone who invested in Basset & Gold prior to their clarifying their investment literature in response to an FCA investigation, which will be most of them given that Basset & Gold closed to new investment in May 2019 (10 months before it collapsed), potentially has a claim for misselling. This is not according to me or some claims management firm trying to drum up business, this is according to the FCA.

That said, we’ve been here before.

London Capital & Finance, which collapsed at the beginning of last year, was also FCA-regulated. The vast majority of LCF investors are waiting to find out whether they will receive compensation. Early indications from the FSCS are far less positive than the message given to Basset & Gold investors above.

While FSCS maintains that the act of issuing mini bonds is not a regulated activity, and is therefore not something we protect, we have concluded there will be some customers who were given misleading advice by LCF and so have valid claims for compensation. However, we expect that many customers will not be eligible for compensation on this basis.

So whether Basset & Gold investors will be compensated en masse is still not clear.

How did we even get here?

Back in 2015 two minibond companies, Secured Energy Bonds and Providence Bonds, collapsed with total losses to investors. Both were promoted by the same FCA-regulated company, Independent Portfolio Managers, which signed off their literature (allowing the bonds to be legally promoted to the public) and also acted as Security Trustee.

As a result of IPM’s involvement, investors in Secured Energy Bonds and Providence Bonds were – after a legal struggle – compensated by the FSCS.

In retrospect therefore, both bonds were risk-free. If the bonds had succeeded investors would get higher returns than cash, and as they failed investors were bailed out by the FSCS. (Which is to say the general public.) Naturally the investors didn’t know at the time they would be bailed out, and they faced years of stress and worry while their lawyers fought the Financial Ombudsman, but that is the position with the benefit of hindsight.

The IPM literature was misleading at the time it was being issued to investors, and the legal position is that this made them eligible for compensation from IPM, and in turn the FSCS, if the investment failed (even if it took the FOS a while to acknowledge it). So the investment was in reality risk-free from the beginning – unless investors exceeded the FSCS limits (£50k at the time).

Basset & Gold have essentially attempted the same setup as IPM + Secured Energy Bonds (or Providence). One company issues the bonds (SEB bonds / B&G PLC). Another FCA-regulated company promotes them (IPM / B&G Finance). The bond issuer goes bust. Investors complain that they were missold by IPM / B&G Finance. FSCS bails them out – or has strongly suggested it will bail them out in the case of B&G.

The difference is that if Basset & Gold investors are compensated, Basset & Gold will essentially have executed a risk-free Secured Energy Bonds type scheme in advance, having successfully arranged its business to ensure that investors would be compensated by the FSCS, and having promoted its bonds to investors on the basis that the FSCS would step in, as per the Facebook screenshot above.

Back in September 2018 I asked (deliberately provocatively) whether the precedent set by IPM had made all unregulated investments risk-free, providing they took the fairly trivial step of setting up an FCA-regulated company to approve the investment literature, which is about as difficult as cutting out two tokens from a cereal packet and sending it to the FCA. (Unlike giving financial advice, signing off investment literature does not require professional qualifications and specific permission from the FCA.)

The collapse of LCF appeared to show it hadn’t. When they bailed out SEB and Providence investors the FOS inserted an anti-precedent device into its reasoning, stating very specifically that SEB and Providence investors were being compensated because IPM was particularly closely intertwined with the businesses it was promoting. IPM did not just sign off the literature but act as Security Trustee. This didn’t apply to London Capital and Finance, which both issued and promoted its own bonds.

However the much more positive noises made by the FSCS and the FCA towards Basset & Gold investors – “The FSCS has determined that many investors have a good prospect of claiming compensation” – seems to have turned that on its head again.

What is there to stop somebody else following the same business model as Basset & Gold – forming one company which issues the bonds, and another which obtains FCA registration and promotes the bonds – and offering whatever rate it feels like to attract investors, on the basis that investors will be bailed out by the general public on the basis of misselling?

Only the FCA taking prompt action to stop the misselling.

Basset and Gold started in its current business model in late 2015 (when an off-the-shelf company called Bladegold was acquired and renamed). Readers have alleged that its activities were reported to the FCA in 2017. No visible action was taken by the FCA until December 2018 when B&G changed its literature, and B&G was eventually stopped from taking new money in May 2019, before collapsing 10 months later.

So in other words, we – that is, all of us who pay FSCS levies via our bank accounts and pensions – are screwed.

Until the UK reforms securities laws to ensure that all investment securities offered to the public are registered with the regulator, as is the case in the USA. This would remove the current discrepancy where the promotion of investments is regulated (and FSCS-covered) but investments are not.

More public subsidy for West Ham

Another angle on the Basset & Gold story is the remarkable ability of West Ham to source money from the general public.

There is in reality no difference between the taxpayer and the FSCS-levy-payer as everyone in the UK pays taxes and everyone in the UK uses financial services.

West Ham already play in a stadium that was built by the taxpayer for the 2012 Olympics. As you don’t get crowds of 50,000+ to watch humans running in circles unless the Olympics is on, and the Olympics comes to the UK once in a lifetime, West Ham were allowed to rent the stadium on very favourable terms, to avoid the embarrassment of the Olympic Stadium being knocked down for flats.

Basset & Gold investor money was used to fund sponsorship to West Ham. If the FSCS bails out Basset & Gold investors to any substantial degree, that means the general public’s money replaces Basset & Gold investors’ money in that equation.

It’s almost as if a former Prime Minister was a West Ham FC fan.

Privilege Wealth administrators file final report, total losses for investors

April 9, 2020April 9, 2020 ~ Phoenix ~ Leave a comment

The saga of Privilege Wealth has all but come to an end. In February the administrators of the collapsed minibond scheme filed their final report, before handing the last of the clean-up to the Official Receiver.

Readers and investors will probably be unsurprised that the outcome was 100% losses for investors, despite Privilege Wealth’s claims that its bonds were “low-risk” and “insured”.

It is now clear there will not be a dividend to unsecured creditors.

The administrators were pursuing recoveries from

a book of pay-day loans to the Sioux Tribe of Native Americans
an insurance policy taken out in the small island nation of Bermuda
an £80k default libel judgement against David Marchant of Offshore Alert, who described the scheme as a fraud before it collapsed. The administrators listed the libel damages as a possible asset despite themselves describing Privilege as a “possible Ponzi scheme”.

Evidently these have come to nothing.

Of the £42 million odd put in by investors, a grand total of around £90,000 was recovered. £27,000 went to the administrators (who took a percentage of all funds recovered, which mostly consisted of cash recovered from escrow) and the rest mostly went on legal fees.

If any readers are wondering why I repeatedly warn investors that “asset-backed investment” actually means up to 100% losses if things go south (in the absence of genuine, professional-standard due diligence establishing that the security will have value), this is why.

Mini-minibond scheme also finally folds

A small offshoot, Munio Capital, which raised money from minibonds paying 9.8% per year and took in £813,000 according to its accounts, is also no more after being struck off the Companies House register, presumably after failing to file a confirmation statement.

Back in 2018, after Privilege Wealth collapsed, director Gary Williamson attempted to voluntarily strike the company off the register, which was thwarted by an objection, possibly from a creditor.

The company has now been put out of its misery by a compulsory strike-off, most likely due to the company’s failure to file details of its ownership since July 2018 (a confirmation statement is required at least once annually, and failing to do so is a criminal offence).

The assets of Munio Capital now belong to the UK Government, but as the administrators of Privilege Wealth have confirmed that there is no prospect of a dividend to unsecured creditors, Munio Capital is also near-certain to be worthless.

Breaking: West Ham unregulated investment partner Basset & Gold goes into administration

April 1, 2020April 1, 2020 ~ Phoenix ~ 1 Comment

Basset & Gold, which offered unregulated bonds, “pensioner bonds” and 30-day “cash bond” notice accounts, announced today that it has gone into administration.

Paul Boyle, David Clements and Tony Murphy of Harrisons Business Recovery and Insolvency (London) Limited were appointed as joint administrators of Basset & Gold PLC (the Company) on 1 April 2020 (the Joint Administrators). They were also appointed as joint administrators of B&G Finance Limited (B&G Finance), a related company, on the same date.

The Company which is not regulated by the FCA, issued bonds which were sold to retail consumers. B&G Finance, which is regulated by the FCA, acted as an intermediary between the Company and investors, arranging investments in the bonds sold by the Company.

Following the appointment of the Joint Administrators there will be no further bond issuances or related investment activity. No bonds have been issued to retail investors from May 2019.

[Hat tip to reader John Doe for spotting the announcement.]

As at its last accounts for September 2018, the company had raised £30 million from investors.

I reviewed Basset & Gold’s bonds in December 2017, commenting that contrary to their “100% asset backed” spiel, the bonds were high risk unregulated investments with an inherent risk of 100% loss.

Basset & Gold claimed on its 2018 website that its bonds offered a “high level of security”. The company also used to claim to offer FSCS protection, on the basis that one of its companies, B&G Finance Limited, was regulated by the FCA, and therefore investors were covered for “misselling”.

How many investors successfully make FSCS claims for Basset & Gold’s failed investments being missold to them remains to be seen.

It also remains to be seen whether the bonds being “100% asset backed” results in recoveries for investors. In other “asset-backed” investments which went into administration, investors have faced anything up to 100% losses as the assets backing the investments were not worth nearly enough to repay creditors.

In addition to its West Ham tie-up, Basset & Gold sold its investments via Google Ads, at one point piggy-backing on NS&I’s popular (and risk-free) “Pensioner Bonds”.

The company has sponsored state-funded football club West Ham United for several years and prominently features the tie-up in its advertising. Its Facebook page is still dominated by West Ham players bedecked in Basset & Gold logos.

The announcement provides no explanation as to why Basset & Gold has fallen into administration.

Reviews left last month on reviews.co.uk suggest the company was already struggling with payments to investors.

Last week I telephoned and was told some one would call me back and no one did. I called again the next day and eventually was put though to my find manager who showed little interest but assured me that he would sort the issue and email me that day. I am still waiting and getting very anxious about the safety of my investment.

As at September 2018, Basset & Gold’s investments consisted almost entirely of money loaned to River Bloom UK Services Limited. River Bloom UK Services Limited published accounts for December 2018 which were unaudited and contained almost no information beyond that the company had £35 million in debts and £35 million in assets described only as “other creditors”.

Both Basset & Gold and River Bloom are controlled by Hadar Swersky, Israeli founder of hedge fund Smart Box Capital. In 2015 Swersky described himself as “an award winning hedge fund manager and entrepreneur. Widely regarded as a savvy investor with accurate trend spotting, his fund was an early mover in multiple fields including algorithmic trading, online option trading and online alternative finance. “

Store First assets sold by Official Receiver to Toby Whittaker’s wife

December 31, 2019December 30, 2019 ~ Phoenix ~ 33 Comments

According to the Lancashire Telegraph, the Official Receiver has sold the freehold, associated assets and goodwill of Store First‘s 15 storage centres to Store First Freeholds Limited.

The assets of the service company, SFM Services, have been transferred to Pay Store Limited.

Both Store First Freeholds Limited and Pay Store Limited are wholly owned by Jennifer Whittaker, reportedly the wife of Store First CEO Toby Whittaker.

According to the Official Receiver, the sale of Store First’s assets to companies owned by Toby Whittaker’s wife “represented the best outcome for creditors”. The consideration has not been disclosed.

The deal does not appear to mean any recovery for Store First investors – instead, they get the opportunity to surrender their pod (and the ongoing liability for business rates) with Mrs Whittaker’s company covering their cost.

The deal would also see requests by investors to surrender their pods accepted, with Pay Store covering any of the associated costs but no payments being issued to the former owners.

If you ever needed a clearer illustration that when an unregulated investment stops paying out and winding up orders start flying, you should write it off and expect nothing, this is it.

In this case nothing is apparently “the best outcome for creditors”. A sub-optimal outcome would be for unfortunate store pod owners to get less than nothing by holding a pod that they were unable to generate income from but left them liable for business rates.

A winding up order against Store First was originally launched by the Business Secretary back in July 2017. Store First reached an out-of-court settlement in May 2019.

An investigation into the cause of the collapse of the Store First investment opportunity continues, according to the Insolvency Service. According to the Government’s lawyer in the winding up case, over £200m was invested in Store First from UK pension funds and elsewhere.

Milton Park Capital (aka FSE Global Solutions) shut down by court order

December 26, 2019December 23, 2019 ~ Phoenix ~ Leave a comment

A company which formerly offered bonds paying up to 16.8% per year has been shut down in the High Court.

A creditor petitioned the High Court in June 2019 and his petition was granted in October. FRP Advisory as been appointed as liquidators.

We reviewed Milton Park Capital’s bonds in December 2018. We concluded that the bonds were inherently high risk, and made even more so by the fact that the company used stock photos to conceal the identity of its directors.

In June 2019 the FCA issued a scam warning against the company.

If any further details emerge from the liquidation we’ll cover them here.

How do I get my money back from Milton Park Capital?

At the risk of prejudging the liquidation, the likelihood of recovery is minimal.

Milton Park Capital investors are now likely to be on a “suckers list” and will be targeted by – and fall for – similar scams in the future.

If anyone contacts you claiming they can recover your money, it is almost certain to be another scam. They will ask you for “legal fees” or similar which you will never see again.

If you were advised to invest in Milton Park Capital by an FCA-authorised adviser or invested via a regulated SIPP company, you may have a claim against them which would be covered by the Financial Services Compensation Scheme. Unfortunately both would appear unlikely to apply.

Carlauren collapse shows it’s not just investors who suffer

December 10, 2019November 29, 2019 ~ Phoenix ~ 5 Comments

With a few exceptions, investors in collapsed unregulated investment schemes generally find sympathy in short supply.

The media will occasionally print the hard-luck story of a someone who invested their entire pension lump sum, or an injury compensation payment, but the news cycle usually moves swiftly on.

And the general public’s opinion of people who invest too much money in collapsed unregulated investments is often that they were some combination of greedy (even though the idea that all collapsed schemes were “too good to be true” is a total myth), naive, or too tight to consult a regulated financial adviser.

This is not a view shared by this blog; anyone who gets the impression that we lack empathy for the position of investors in failed investments has not understood why Bond Review exists.

Those who parrot thought-terminating clichés like “a fool and his money are soon parted” might pause for a change to consider the plight of elderly residents in Carlauren’s care holmes.

In June, as Sean Murray’s empire built on promises to pay investors 10% a year collapsed around his ears, elderly and vulnerable residents at Tyndale House were told they had a month to find alternative accommodation.

As if this wasn’t distressing enough, on 2 July, the same day Carlauren COO Andrew Jamieson was confronted by unpaid staff, the residents were told this deadline had been accelerated to 24 hours. According to Bond Review reader cpnorfolk:

Social Services had to find emergency accommodation for the residents. My sister managed to get my mother into the care home she was due to transfer to. They were able to fit her in a week early, but it was utter pandemonium on the day and very distressing for all.

Another reader, Jps, says:

Due to non-payment of staff, the residents were put at risk. These risks were presented to senior management prior to closure yet they choose to ignore them. Residents had just 4 hours to find somewhere else to live. Staff continued to work really hard with the help of social services to ensure that this was done with as much dignity as possible. However no-one can compensate for the distress and heartbreak this caused those elderly residents and staff members.

According to ITV News, residents of sheltered housing owned by Carlauren were left without on-site support as a knock-on effect of the closure of Tyndale House. Carlauren said at the time they “have been working hard to ensure they receive the care and support required”.

The fact that the collapse of Carlauren’s unregulated investment scheme left a number of elderly care home residents as collateral damage is more than an unfortunate accident.

The purpose of the financial system is to move money from where it is to where it is needed.

The purpose of financial regulation is to ensure that it does so as efficiently as possible, with a minimum of waste. When this system goes wrong, people’s money is not used to bring economic benefit, but the opposite.

If, hypothetically, I take £5 million off a bunch of investors claiming I’m going to pay them 8% per year for investing in property development, and use £1 million to pay some architects and builders to build the skeletons of a few buildings, knowing it has virtually no chance of ever seeing completion because the scheme will run out of money long before, it is not just the investors’ £5 million which has been lost.

It is also a waste of the architects’ and builders’ time which could have been spent building something that actually had a chance of seeing the light of day.

Economists talk of “the multiplier effect”, which means that when somebody spends money to buy stuff, whoever they buy it from pays their workers and themselves, who buy more stuff, and so on. Economic activity generates more economic activity.

Unfortunately the multiplier effect also applies to economic damage.

The failure of duff investments leaves not just investors with empty pockets but abandoned building sites, wasted resources and in this case, distressed elderly residents.

Had Carlauren not been able to raise money directly from retail investors on promises of 10% per year, it is highly unlikely that it would have been able to purchase Tyndale House and other care homes. Institutional investors were unlikely to hand over money because a guy fresh off the back of the failure of a scheme involving the sale of distressed properties in Detroit had decided to try his hand at looking after the elderly.

The complacent idea that the collapse of unregulated investment schemes doesn’t matter because it only affects “fools and their money”, which has allowed the Government to leave UK securities law stuck in the 1920s, needs to be re-examined urgently.

A billion pounds is at risk of loss in unregulated investment schemes that solicited investment from the public and entered administration in 2019. This is not just a loss to the investors but to the UK economy as well.

Anyone home?

Park First told Russian investors that they’d repaid buyback investors

December 5, 2019December 2, 2019 ~ Phoenix

Reader Sally Jones has drawn my attention to some eye-opening posts over the past year from collapsed unregulated car park investment scheme Park First’s Russian Instagram account.

All quotes below have been machine translated from the original Russian.

In December 2017 the Financial Conduct Authority shut down Park First’s original incarnation, which promised “guaranteed” returns of 8% in the first two years followed by returns of 10% and 12%, on the grounds that it was an unauthorised collective investment scheme.

Park First was however allowed to continue in operation, having restructured as a “lifetime leaseback” arrangement offering fixed returns of only 2% a year plus a variable dividend.

A dividend is a payment to investors out of company profits. Dividends cannot be paid if there are no profits.

valentines — Wondering what to get the Russian woman who has everything for Valentine’s Day? Have you considered a Glasgow car parking space? Me neither.

After the shutdown, Park First continued to use its Russian Instagram account to promote the scheme to Russian-speaking investors. Parkfirst.ru served up a series of posts featuring seminars, characteristically jolly promoter Lola Chinieva, and eye-catching meme-type images.

Park First continued to project total returns of 7-10% per year in its promotions, despite the inherently unpredictable nature of dividends.

The yield of 7-10% per annum in pounds sterling consists of:
? fixed rental income 2% per year
? dividends from the operation of parking spaces. Dividends are calculated at the end of the year and are divided among investors in proportion to the number of parking spaces owned.

On average, the total annual income is 7-10% in pounds.

On 11 March 2019 Park First’s Instagram published an “official response” to an unspecified Bond Review post, probably my April 2018 article covering Group First’s red-ink-splattered accounts for the 2017 accounting year.

Nothing says “secure 7-10%pa returns” like a drunk tramp standing in a paddling pool in front of a run-down council house.

The machine translation isn’t very helpful but the gist of Park First’s response was that “referring to the financial statements of one year 2017, without trying to figure out what figures are reflected in it, is not quite correct”. Park First attempted to persuade investors that they should not worry about its net liabilities as “the income of future periods are not indicated”.

What stands out is this statement:

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.

(Original Russian: ??????????? ?????????? ??? ????????? ?????: ??????? ?? ????? ????? ?????????????? ??? ??????? ???????? ??????????? ?????, ????????? ?????? ???? ??????.
?
????????????? ????? ????????? ??????????? ???????? ????????? ? ?????? ??????.
?
?????????, ????????? ????????, ??? ???????? ??????? ????? ? ?????????.)

PLEASE TO INVEST NEW MONEY OR GOTH JOKER VILL BURY YOU

Following Park First collapsing into insolvency, we now know that Park First’s claim that “the company fulfilled its obligations to investors who left in full” is not accurate.

If Park First are attempting to use a definition of “fulfilling its obligations” that doesn’t mean “giving investors their money back”, it’s unlikely anyone else reading their announcement would have read it that way.

In addition, it’s not clear how Park First managed to pay dividends when it has never reported a profit and it went into insolvency a year and a half after its forced restructuring by the FCA.

Another Instagram post from December 6 2018 makes it clear that Park First’s idea of what constituted a “dividend” differed dramatically from both the general understanding of the word and UK company law.

Until December 20, the promotion is valid
?
Customers who purchase more than 2 parking lots ?? can save 30% on the cost ?!
?
What does this discount consist of?
? 10% discount on the initial cost
? payment of dividends of the 1st and 2nd year 10% paid immediately
?
Thus, the client acquires parking spaces at a discount of 30% and begins to receive income from the third year according to the formula 2% fixed + dividends.

You cannot pay someone two years’ worth of 10% dividends in advance. Dividends must be paid out of company profits and you can’t pay someone a 10% dividend when you haven’t generated the profit yet.

Not that knowing that is of much use to Russian Park First investors now, who are now stuck waiting for the outcome of the administration along with all the other investors.

Smith & Williamson sees off rival bid for Park First administration

December 4, 2019December 3, 2019 ~ Phoenix ~ Leave a comment

Smith & Williamson has succeeding in seeing off rival Quantuma’s bid to investors to be appointed administrator of Park First.

A letter sent to Park First investors on Monday 2nd confirms Smith & Williamson’s proposals for the administration were accepted in full.

Smith & Williamson therefore cements its reputation as the go-to administrator if your unregulated investment scheme has just collapsed, having also been appointed to clean up after London Capital & Finance and Krono Partners (in all cases by the collapsed firms themselves).

Rumour has it that Park First is unlikely to be their last appointment in the sector.

Group First hit the phones in the weeks before the court date to find out which way investors would vote.

Smith & Williamson estimates its fees for the first year of the administration will stand at £1.17 million (it is unlikely Quantuma or any other credible rival would have been any cheaper).

Running parallel to the administration is an FCA court case against Park First, its owner and CEO Toby Whittaker, and other senior managers, seeking compensation on behalf of investors for losses they suffered in the scheme.