Dolphin Trust accounts in “total mess”, no money left, says administrator

~ Phoenix ~ 6 Comments

The administrator of Dolphin Trust (latterly known as German Property Group, and referred to here by its more well-known and less generic name) has revealed that the accounts are in a “total mess”. As reported by FT Adviser:

In a letter in August partner Tim Beyer wrote: “Please note that we have found a total mess over here. It will take at least to the end of September before the insolvency court will have issued court orders for all companies of the GPG group. 

“And due to the fact that the bookkeeping, the documentation and all other relevant information regarding assets, money, etc. are incomplete, not available in the first place or just a total mess, we probably need at least until the beginning of 2021 before we are in a position to talk about any concrete investment or assets.”

Beyer also revealed that the Dolphin companies have been emptied of funds.

“And all of this we have to do with nearly no money on the accounts of the companies of the GPG group,” he said.

Dolphin Trust / GPG and its personnel extensively raised funds in the UK via a combination of unregulated introducers, fraudulent pension liberation schemes, and Nicola “Superwoman” Horlick’s Money & Co platform, where it used the name “Project Seascape”.

An attempt to enter the Intelligent Finance ISA market, again via Horlick’s Money & Co, this time using the name “Grounds Investment plc”, resulted in an abrupt reverse ferret. All Grounds funds were returned to investors in August 2019, only a few months after the launch. By that point Dolphin’s problems were already out in the open, after the BBC reported on them in May 2019.

The UK’s Financial Services Compensation Scheme is now likely to be on the hook for any Dolphin investors who were missold their investments via FCA-regulated companies. The FSCS has indicated that it may assume that Dolphin investments as being worthless and take over any recoveries on behalf of investors.

Imperial Investments hit by FCA scam warning, bank account closure

~ Phoenix ~ 2 Comments

Ponzi scheme Imperial Investments, which promises investors returns of 350% per year, has been listed as a scam firm by the Financial Conduct Authority.

FCA register entry for Imperial Investments.

I reviewed Imperial Investments back in April. Imperial claimed that investors could solve their rent and bills worries by investing with Imperial. I pointed out that in reality, Imperial Investments in a Ponzi scheme and the vast majority of its investors are guaranteed to lose money.

In what may be related news, Imperial Investments “co-founder” Dan Pugh revealed in a series of Facebook video updates that Imperial’s bank has closed its account, most likely having got wind that they were being used to run a Ponzi scheme.

In an update posted 18 August, Pugh hilariously claimed that Imperial’s bank account with Starling was shut down because Starling are going bankrupt. Drinking from a glass of dark liquid that he claims to be Red Bull, and sitting in front of a wardrobe of identical Imperial Investments polo shirts, Pugh says:

The next part is for anybody that is with Starling. What we think has happened with Starling, if you go onto Trustpilot and click “poor reviews”, you will see that in the past 2-4 weeks all of the reviews are the very same problem that me and Scott are up against right now. What we think and what Scott thinks as that they are going under, bankrupt, poof.

Now why we think this is because 1) they blocked our business account. The only reason they’re giving us is because £170,000 is apparently a lot of money. […] In what world is that a lot of money when it’s a business account and an investment fund? Secondly, we tried a test, Scott tried to move money from his personal account. Now they let him do this but today when he’s received a payment from – other things that we do – they blocked his account, his personal account, would you believe it? This is the second thing that makes us think they are going under.

“Scott” is Scott Wood, Imperial’s alleged Malaysia-based “co-founder” who is actually the sole owner of Imperial Investments’ corporate entity. If Wood actually exists, he keeps an extremely low profile. There is no public photo of him and Pugh fronts all Imperial’s Facebook updates.

In the world’s most pathetic attempt to start a bank run, Pugh advised all Imperial investors to withdraw any money they had from Starling, falsely claiming that if they went bankrupt it would take the FCA 3-4 years to compensate them. (The reality is that when an authorised deposit-taker goes under, compensation is paid by the FSCS within weeks.)

In the update Pugh falsely claims that Imperial Investments does not require FCA authorisation, despite running a collective investment scheme, because it doesn’t hold customer’s money in its own account. This is irrelevant to the definition of a collective investment scheme, which under UK law requires only a) that investors’ money is pooled and b) that investors do not exercise day-to-day control over their investment.

Pugh also revealed that in an attempt to circumvent the kind of anti-money laundering checks that caused Starling to give them the heave-ho, Imperial has set up a Malaysian shell company.

We are registering the company in Malaysia. The name of the company will be IIF Private Asia Limited. There are certain reasons we had to name it that, which are very long-winded, but nonetheless, it’s still Imperial. It will be classed as a subsidiary under our Companies House here in the UK.

Whether Imperial has succeeded in its attempt to set up new banking channels in Malaysia is unclear. At time of writing Pugh’s “get your money out of Starling because they don’t like Ponzi schemes” update is the most recent on Facebook. There has been no update regarding the FCA warning.

Malaysia is not well known for its financial regulation, but nonetheless Malaysian bankers speak English and are perfectly capable of reading FCA scam warnings.

We review Intercare’s care room investment paying up to 10% per year

~ Phoenix ~ 10 Comments

Intercare offers unregulated care home investments paying “assured rental income” of up to 10% per year for investing in care home bedrooms.

Intercare guarantees to buy the bedroom back off the investor after 3, 5, 9, 15 or 20 years; the guaranteed purchase price includes an uplift of an additional 3% per year for the first 5 years, and 2% per year for the subsequent 15.

Investments of £75k – £100k start at 8%pa rental income and escalate to 10%pa over the first five years. Investments of £100k start at 9%pa and £125k at 9.5%pa, again escalating to 10%pa. Investments of £150k pay 10% throughout.

Intercare is currently being promoted on Facebook by unregulated third-party introducers.

Who are Intercare?

Intercare inaccurately names its corporate identity as “Intercare Ltd” on its website. As far as I can tell there is no such company. There are about a dozen Intercare companies judging by Companies House data for its owner, Dr Sohail Qureshi; the top company appears to be Intercare Group Limited, which was incorporated in February 2020. Due to its young age it is yet to file accounts.

Intercare CEO Dr Sohail Qureshi
Intercare owner Dr Sohail Qureshi

CEO Dr Sohail Qureshi (full name Muhammad Sohail Akhtar Qureshi) is the sole “person of significant control” although as of March 2020 he is not a majority shareholder. No other significant shareholders have been declared.

How safe is the investment?

Intercare claims that the fact that it is paid to house elderly people by local councils “provides a secure source of fee income”. The fact that Intercare receives care fees from local government does not make the investment secure. Intercare has to receive enough money from the Government to pay investors returns of up to 13% per year after its own costs (including commission paid to third party introducers) for the investment not to default.

Intercare say there are two options for investor to exit, either the aforementioned “guaranteed” buyback or selling to a third party; however, selling a care home room to a third party is unlikely to be realistic if Intercare are selling care home rooms at the same price with a promise of up to 13%pa returns attached.

Should Intercare run out of money to pay the 10% returns or guaranteed buyback and default, there is a significant risk that investors will not be able to sell their rooms for as much as they paid for them to a third party. A room in a care home to which the care home owner controls access is a very different asset from a buy-to-let flat to which the investor controls access.

In the extreme case, the investment in the care home room could be worthless if the care home shuts, meaning the room generates no income, and nobody is willing to buy out investors who own leases on individual rooms in order to take it over.

Investors relying on the “guarantees” provided by Intercare should hire professional due diligence specialists (paid by themselves, not Intercare) to confirm that in the event of a default, the assets of Intercare would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Intercare tells them about their assets.

Should I invest in Intercare?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any investment in an unlisted micro-cap company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment offering returns of up to 13% per year is inherently very high risk. As an individual, illiquid security with a risk of total and permanent loss, Intercare’s care home rooms are much higher risk than a mainstream diversified stockmarket fund, let alone cash accounts.

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
  • Have I conducted due diligence to ensure Intercare’s “guarantees” can be relied on?

If you are looking for a “guaranteed” investment, you should not invest in leases on care home rooms with a risk of up to 100% loss.

Capital Bridge (aka Northbridge) in administration, up to £2.3 million investor losses, 40% commissions paid

~ Phoenix ~ 4 Comments

In October 2018 I reviewed The Capital Bridge’s IFISA bonds paying 9% per year. The Capital Bridge, whose full name was initially Capital Bridge Bondco 1 and then First Northbridge (it looks unlikely there’ll ever be a sequel) loaned investors’ money to Capital Bridging Finance Solutions Limited.

CBFS went into administration in April and The Capital Bridge inevitably followed it into administration in June. [Hat tip to reader Alex Wright who brought the collapse to my attention.]

The administrators of First Northbridge have now released their initial report. A total of £2.3 million was raised by First Northbridge. Prospects for any recovery are described as uncertain.

Capital Bridge’s ultra-high-risk unregulated bonds were promoted by Google Ads alongside FSCS-protected Cash ISAs.

In April 2019 Capital Bridge belatedly disclosed that up to 20% of investor’s money would be paid to introducers as commission.

The next time Capital Bridge’s name cropped up was when Bury FC’s unregulated car parking investment scheme collapsed (along with the footy club), along with other schemes run by its former owner.

Capital Bridging Finance Solutions loaned £2.3 million to Bury FC. Up to 40% of this was paid as yet more commission to unknown parties in exchange for arranging the loan.

Capital Bridge Bondco investors therefore join the long list of retail investors left counting their losses after the collapse of Bury FC.

Hundreds of people have lost money on student units they bought in blocks which have not been completed. Marcus Levine, a Leeds-based artist and investor in a Huddersfield scheme, said fellow investors include one terminally ill man, and another who invested the lump sum he received on early retirement. Another, Muhammad Rafiq, said he had invested his life savings of £30,000: “I have worked since I was 16, and I followed my parents’ advice to put my money into safe investments like property,” he said.

There was no mention of loaning to lower-league football clubs in The Capital Bridge’s brochure, which claimed that CBFS would “lend to hand-picked property developers in the UK” and “ensure that strict criteria are adhered to and only onward lend to borrowers who can satisfy these requirements”.

We review Acorn Property Bonds’ unregulated bonds paying up to 12% per year

~ Phoenix ~ 9 Comments

Acorn Property Bonds (a trading name of RST Group Holdings Limited) offers unregulated bonds paying up to 12% per year as follows:

  • 8.5% per year for a 3 year investment with income paid out
  • 10% per year for a 3 year investment with interest paid at the end of the term
  • 10.5% per year for a 5 year investment with income paid out
  • 12% per year for a 5 year investment with interest paid at the end of the term

Note that the above interest rates are simple interest for the rolled-up bonds. On a compound interest basis the 3 year roll-up bond returns 9.1%pa and the 5 year bond returns 9.9%pa.

And yes, this means that the 5-year “capital growth” bond pays you a lower rate of return than the 5-year “quarterly return” bond despite being higher risk. It is a lower rate of return, despite the higher headline rate, because you can reinvest the income you receive from the “quarterly income” bond. This is why compound interest is universally used to compare two investments rather than simple interest.

The “capital growth” bond is higher risk because if we imagine (purely hypothetically) that Acorn defaults after three years, 5 year quarterly return investors will at least have 31.5% of their stake safely in their pocket, while 5 year “capital growth” investors will be contemplating total loss.

Who are Acorn Property Group?

The bonds are issued by RST South West Investments Limited with a “Corporate Guarantee” from RST Group Holdings Limited.

RST South West Investments Limited was incorporated in April 2019. It is yet to file its first accounts (which thanks to Covid are not due until April 2021).

RST Group Holdings Limited was incorporated in April 2017. Its last accounts to September 2018 showed net assets of £24.5 million. (Clearly it wasn’t guaranteeing a £10 million bond issue at the time as its total creditors were only about £790k. Its assets consisted entirely of money loaned to other companies in the group.)

RST Group Holdings Limited’s parent company, RST Residential Investments Limited, is considerably larger (though still a micro-cap company with £13k in net assets according to its September 2018 accounts). Note however that it’s the companies issuing and backing the bonds that we’re interested in here. That does not include RST Residential Investments Limited as far as I can see.

Acorn fails to disclose who ultimately control the business. RST Group Holdings Limited is owned by RST Residential Investments Limited (incorporated 2008), which stated to Companies House in 2016 that there is no registrable entity who controls the business. An annual return that year stated that RST Residential Investments Limited was owned by RST Highgate Investment Trust.

There’s no UK company by that name and a search for RST Highgate Investment Trust on opencorporates.com and the global LEI database turned up nothing.

While the directors of Acorn Property Group may be known, on whose behalf they run the company is not. All that is disclosed publicly is that it’s something called RST Highgate Investment Trust. As to what that is, whose benefit it’s run for and where it’s even located, I’ve drawn a blank.

How safe is the investment?

In an advertorial posted on Business Cornwall, Acorn claims that they offer “another way” compared to the “gamble” of buy-to-let and the “homework” required for regulated property funds.

Buy-to-let can be a gamble while fewer tax breaks, strict health and safety and environmental rules, maintenance and rogue tenants can make managing a buy-to-let complicated – not to mention time consuming. As for real estate investment trusts (REITs), well, you’ll need to do your homework to find the right fund for you.

Of course – there is another way.

In reality, as with any loan to an unregulated individual company, Acorn Property Bonds are an inherently high risk investment with a risk of up to 100% loss.

Acorn’s implication that unregulated loans with a risk of up to 100% loss are not “a gamble” and do not require “homework” is nonsense. Loans to unlisted, unregulated companies require if anything more homework than regulated REITS.

Secured lending is not risk-free as there is a risk that if the underlying borrower defaults, the security cannot be sold for enough to cover the loan.

Investors in asset-backed loans have been known to lose 100% of their money when it turned out that there were not enough assets left to pay investors after paying the insolvency administrator (who always stands first in the queue).

This is not in any sense to imply that the same will happen to investors in Acorn Property Bonds, only illustrating the risk that is inherent in any loan note even when it is a secured loan.

If investors plan to rely on this security, it is essential that they hire professional due diligence specialists (working for themselves, not Acorn) to confirm that in the event of a default, the assets of Acorn swould be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Acorn tells them about their assets.

Acorn itself says in its own brochure “SPVs (Special Purpose Vehicles) are legal entities set up for a specific purpose to isolate risk. They are designed to prevent adverse risk being transferred to or from the owners of the SPV.”

What Acorn are referring to here is that setting up new companies to issue the bonds, which then lend to special purpose vehicles, means that if those SPVs fail, and the company issuing the bond fails in turn, investors will not have any claim on the assets of Acorn’s owners outside those entities. It is not the investors being isolated from risk by setting up SPVs but Acorn’s owners.

No matter how much time Acorn spend in their literature banging on about the successful history of the wider development business, it’s of limited relevance to investors if that wider business has no liability to repay their loans. This is the kind of issue investors need to be very aware of in their due diligence.

Should I invest in Acorn?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any individual loan note to an unlisted startup company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment paying up to 12% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, lending money to Acorn is much higher risk than a mainstream diversified stockmarket fund (including REITS).

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
  • Have I conducted due diligence to ensure the asset-backed security can be relied on?

If you are looking for a “secure” investment, you should not invest in unregulated loans with an inherent risk of 100% loss.

FCA did betray investors and surrender to OneCoin Ponzi scheme, BBC podcast reveals

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Last November, following up on a Private Eye story, I asked whether the FCA had withdrawn a “scam warning” against the international billion-dollar Ponzi scheme OneCoin, after threats from notorious libel lawyers Carter-Fuck (more vulgarly known as Carter-Ruck).

As a refresher, OneCoin took in £4 billion from investors in exchange for “OneCoins”, its made-up cryptocurrency. OneCoins were given an imaginary and ever-increasing value, which investors could cash out to a very limited degree via an exchange. These withdrawals were funded by new investors’ money, in the classic Ponzi scheme fashion.

The scheme collapsed in 2017 when it ran out of money and the exchange was shut, although OneCoin limps on to this day as a pyramid scheme, despite the arrest or disappearance of virtually all its former top brass.

In 2016 one of OneCoin’s promoters / victims had a Road to Damascus moment and started making videos calling out OneCoin as a scam. OneCoin hired Carter-Fuck to send letters threatening her with libel action.

McAdam stood her ground, declined to remove her videos and heard no more from Carter-Ruck.

So far, still so cookie-cutter cryptocurrency scam.

Where it gets interesting is that Private Eye notes that the Financial Conduct Authority issued a scam warning against OneCoin in September 2016.

Shortly after Carter-Ruck sent its SLAPP attempt to McAdam, the FCA withdrew its warning.

The FCA has refused to comment on whether the removal of the OneCoin scam warning followed any lobbying from OneCoin’s end.

Yet nonetheless, somehow and for some reason it was persuaded to remove an entirely factual scam warning.

Thanks to the BBC’s “Missing Cryptoqueen” podcast, we now know the answer to the question “Did the FCA spinelessly cave in to a half-baked Ponzi scam” is “yes”.

BehindMLM picks up the story: (quotes are from the Missing Cryptoqueen podcast, transcribed by BehindMLM)

[22:28 Gary Gilford, a lawyer for OneCoin mastermind Ruja Ignatova] At the time, when I think Carter-Ruck and Chelgate were involved, the Financial Conduct Authority put out a warning on their website, about anyone doing business with OneCoin and OneLife.

So Carter-Ruck and Chelgate were writing to the Financial Conduct Authority.

Whatever they did, was convincing enough for the FCA to take the (OneCoin) notice down. […]

[24:42, Simon Harris, former Chelgate employee] In the weeks prior to my arrival (at Chelgate) on August 2017, there was a warning on the … FCA’s website.

And Chelgate worked with Carter-Ruck to pressurize (the FCA), to weaken their public stance on OneCoin.

The FCA’s withdrawal of the scam warning led directly to further investor losses, as OneCoin promoters used the withdrawal as “proof” that OneCoin wasn’t a scam.

[26:34 Ken Labine, OneCoin promoter] If they (the FCA) still thought we were a fraudulent company, OneCoin, then guess what; that warning’s not removed. Game over.

The FCA made no visible attempt to stop OneCoin promoters portraying the removal of the scam warning as approval.

It has bleated that it took the scam warning down because OneCoin was not carrying out any regulated activities.

The FCA does not regulate cryptocurrency assets, and therefore it could not take this matter further.

This, of course, is bollocks.

OneCoin investors handed their money to OneCoin in order to invest in their made-up points, which were tracked via an SQL database. They were able to cash out a return for as long as OneCoin had enough investors’ money in the system to honour withdrawals. Investors took no part in the day-to-day running of OneCoin, simply sat back and watched their “coins” increase in value and/or attempted to make a return by taking withdrawals (paid with other investors’ money).

This pooling of investors’ money to pay out returns, with no day-to-day involvement by investors, represents a collective investment scheme. Promoting a collective investment scheme to UK invstors requires authorisation from the FCA.

The fact that the scheme in question was a Ponzi scheme with no real underlying investment is irrelevant. That investors handed over money for coins tracked via an SQL database rather than, say, car parking spaces is irrelevant. The essential elements of a collective investment scheme are the pooling of investor money and the lack of day-to-day involvement by investors, both of which were true of OneCoin.

There are plenty of Ponzi schemes which manage to conceal their nature from regulators. London Capital and Finance, for example, could not be publicly called out as a Ponzi scheme until after it had collapsed, and the administrators had revealed that its half-billion-odd of asset security didn’t exist, and it had no income-producing assets funding returns to investors.

OneCoin was not one of them. It operated openly as a Ponzi scheme from the beginning, with no serious attempt to pretend that it had any source of funds with which to honour withdrawal requests other than investors’ own money.

BehindMLM first described OneCoin as a Ponzi scheme in 2014. Despite Carter-Ruck’s threats (which came a whole 2 years later), nobody was ever found guilty of libel in a court of law for describing OneCoin as a scam.

And the real scandal is not that the FCA’s scam warning was entirely factual, and trivially proven as such from facts publicly available at the time, but that this didn’t even actually matter as the FCA has statutory immunity from being sued.

Suing the FCA for libel for publishing a scam warning against you requires persuading a court not just that you aren’t a scam, but that the FCA acted unlawfully or in bad faith, a virtually insurmountable bar which OneCoin was never going to clear.

The good news here is that the OneCoin scandal gives the FCA a golden opportunity to prove it has actually changed under new head Nikhil Rathi.

By publicly naming the official who gave OneCoin the green light to scam UK investors, sacking them for gross misconduct (if they are still there), and giving an unconditional apology to all UK OneCoin victims. (An apology with zero compensation – the UK taxpayer should not underwrite foreign Ponzi schemes.)

Anything less will confirm that the FCA still views consumer protection as an annoying and tedious distraction from its real job of high-level thought leadership.

We review Cafelavista’s coffee machine investment paying 15% per year

Cafelavista logo
~ Phoenix ~ 12 Comments

Cafelavista offers returns of 15% per year to investors who invest in its coffee machines.

Investors buy coffee machines for £3,000 each (+ £600 VAT if they are not VAT registered) and then rent back their machine to Cafelavista, which promises to pay a total of £5,700 per machine back to them (in rental income, an annual “ingredient bonus” and a final “balloon payment”) over a six year term, after which Cafelavista promises to take the vending machine back.

This gives an average return of 15% per year, or 9.7% if the investor has to pay £600 VAT on top of their initial purchase.

Who are Cafelavista?

Cafelavista owner Antony SpearCafelavista Limited is run by founder Antony Spear.

Prior to setting up the Cafelavista investment scheme, Spear ran a tiny website design firm which appears to have stopped work in June 2018, judging by its Facebook page. (Its last project was for The Tasty Plaice Fish & Chip Shop in Bridgend Industrial Estate.) According to Spear’s LinkedIn profile, prior that he ran “Spear Business Consulting” from 2004 to 2016. Spear Business Consulting has left no trace on the Internet that I could see.

Cafelavista Limited’s last accounts for February 2020 show little information other than £77k of net assets. The entity of most interest as far as the investment scheme is concerned is Vista Rental Limited, as this is the company which commits to pay returns to investors. However, Vista Rental extended its first accounting period to February 2021 last month, meaning it will not be due to file accounts until June 2021.

How safe is the investment?

Cafe La Vista claims to provide a “LOW RISK – HIGH REWARD” investment. In a YouTube advert it states

In the stock market, the bigger the risks, the higher the rewards. With CAFELAVISTA, there are high rewards to be gained but a low risk investment.

This is misleading to the point of total claptrap. Fundamentally investors are not investing in a vending machine but in Cafelavista’s promise to pay them 15% per year. An unregulated investment in an obscure small company is not in any sense “low risk”.

Cafelavista claims its investment is “100% asset backed” and offers “guaranteed buy back”.

The guarantee to buy investors’ machines back is dependent on Cafelavista having the money to do so. Otherwise investors will be trying to sell used vending machines on the open market. In which case, given that they aren’t going to be offering a 15% per year return, they should expect a significant loss.

Should Cafelavista fail to make enough money to pay investors 15% per year on top of their own costs, the worst case scenario, bearing in mind that Cafelavista holds the vending machine, is that Cafelavista cannot even return the vending machine and the investor loses up to 100% of their money.

If investors plan to rely on the claim that Cafelavista is “100% asset backed”, it is essential that they hire professional due diligence specialists (working for themselves, not Cafelavista) to confirm that in the event of a default, the assets of Cafelavista would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Cafelavista tells them about their assets.

Regulatory issues

Cafelavista Instagram advertCafelavista solicits investment directly from investors via Facebook and Instagram adverts.

Issuing financial promotions in the UK requires authorisation from the Financial Conduct Authority. Cafelavista is not authorised by the FCA and there is no indication on Cafelavista’s adverts that the promotions have been signed off by an FCA-regulated firm.

If Cafelavista are pooling investors’ money to pay their 15% per year, this would constitute a collective investment scheme under UK law, which also requires authorisation from the FCA.

Running unauthorised collective investment schemes and issuing financial promotions to the public without FCA authorisation are both criminal offences.

Should I invest with Cafelavista?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any investment in a tiny unlisted company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment offering returns of 15% per year should be considered extremely risk (despite Cafelavista’s nonsensical claim that investing in coffee machines isn’t subject to the universal rule that high returns = high risk).

As an investment in an individual micro-cap company with a risk of total and permanent loss, Cafelavista is much higher risk than a mainstream diversified stockmarket fund.

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted, Cafelavista did not have the money to back its “guarantees”, and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage my lifestyle?

If you are looking for a “low risk” or “guaranteed” investment, you should not invest in unregulated investment schemes with a risk of 100% loss.

We review Divitias Wealth’s loan notes paying 12% per year

Divitias Wealth logo
~ Phoenix

Divitias Wealth plc offers “Private Offering Protected Fixed Income Bonds” with a 24 month term which pay interest of 1% per month, with coupons paid quarterly.

Investors’ money is to be used to invest in “delta neutral” arbitrage trading – identifying a mismatch between prices for the same asset on different exchanges, buying assets at the cheaper price and immediately selling them at the higher one.

Who are Divitias Wealth?

No details of who is behind Divitias are provided by its website. Companies House reveals that Divitias is owned by Daniel Willis.

Prior to founding Divitias, Willis is described on his LinkedIn page as CEO of Goldsmith Barron. Goldsmith Barron appears to have been an obscure insurance broker (an appointed rep of Brightside Insurance Services) which was struck off the Companies House register in 2017 after failing to file accounts. Willis’ published CV ends there.

How safe is the investment?

A brochure for Divitias states that “low risk and high returns are key features most investors look for” and claims the bond offers “security and protection for investors” and “capital guarantee”.

In reality, as with any loan to an individual company, Divitias is an inherently high risk investment with a risk of up to 100% loss.

Divitias claims that its “delta neutral” arbitrage strategy “enables us to offer a high yield, at low risk, over a relatively short investment term”.

However, to return investors’ interest and capital, Divitias has to identify enough arbitrage opportunities to successfully pay interest of up to 12% per year after its costs and any commission paid to introducers.

Arbitrage opportunities are by nature difficult to come by and there is an inherently high risk that it will not succeed.

Investors hold security over Divitias’ assets via a Security Trustee.

Secured lending is not risk-free as there is a risk that if the underlying borrower defaults, the security cannot be sold for enough to cover the loan.

Investors in asset-backed loans have been known to lose 100% of their money when it turned out that there were not enough assets left to pay investors after paying the insolvency administrator (who always stands first in the queue).

This is not in any sense to imply that the same will happen to investors in Divitias, only illustrating the risk that is inherent in any loan note even when it is a secured loan.

If investors plan to rely on this security, it is essential that they hire professional due diligence specialists (working for themselves, not Divitias) to confirm that in the event of a default, the assets of Divitias would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Divitias tells them about their assets.

Divitias states that “a Financial Bond Indemnity insurance policy has been purchase to provide indemnity against the exacting professional risks associated with the bond offering”.

Indemnity insurance is not a guarantee against default. “Professional risks” does not include the risk that Divitias is unable to identify enough arbitrage opportunities to pay all its investors 12% per year after all commissions and costs.

Fundamentally, no insurer acts as a guarantor to an unregulated investment paying investors 12% per year. If the scheme used some of its pre-interest earnings to buy insurance against default, the cost would bring the return it could offer investors down to the risk-free rate.

Should I invest in Divitias?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any individual loan note to an unlisted startup company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment paying 12% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, lending money to Divitias is much higher risk than a mainstream diversified stockmarket fund.

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
  • Have I conducted due diligence to ensure the asset-backed security can be relied on?

If you are looking for a “low risk” or “protected” investment, you should not invest in unregulated loans with an inherent risk of 100% loss.

Magna Global’s MIX2 posts £1 million loss as owner scrubs luxury lifestyle from Insta

~ Phoenix ~ 24 Comments

Struggling property investment scheme Magna Global has filed July 2019 accounts for its MIX2 entity, reporting a £1 million loss.

This follows Magna investors reporting they have not been repaid on time, and one of Magna’s other companies which took in money from investors, Magna Investments X (aka MIX1), also posting a £1 million loss.

MIX2 issued 12-month bonds to investors paying 12% interest over the term. Bonds were promoted to investors by unregulated introducers.

MIX2 owes a total of £5.4 million and has assets of £4.4 million, described mostly as “unlisted investments”. The accounts used small company exemptions and contain little other information.

The accounts were filed at the last minute on 30 July before the 12-month deadline expired.

Magna’s final entity that I know of, MIXG Limited, is due to file its first accounts by the end of October.

Magna joint-owners Chris Madelin and Oliver Mason have recently scrubbed their Instagram profiles. Madelin’s in particular was notable for its dedication to posting public photos of him enjoying a luxury lifestyle.

Chris Madelin Instagram
Living in the crap of “luxuary”.

Where Madelin got his wealth from is unclear. At time of writing, companycheck.co.uk lists Madelin as the director of 26 active UK companies that I was able to find. Most of these had negative or zero net assets and none of those with positive net assets had more than £30k.

Chris Madelin Instagram
Mr Madelin is not accused of any wrongdoing other than crimes against taste.

(Hat tip to a Bond Review reader who saved the photos from Instagram.)

Basset & Gold: minimal recoveries expected for investors, 20% commissions paid

~ Phoenix ~ 5 Comments

The administrators of collapsed West Ham sponsor Basset and Gold have released their initial report.

Around 1,800 people, described as “everyday investors” by the administrators, invested nearly £36 million into Basset & Gold after being recruited by “internet based marketing and social media campaigns”.

Despite Basset & Gold’s literature claiming that investments were “backed by assets, such as property, corporate debentures and other forms of security in order to PROTECT our investments and your capital”, virtually all of investors’ money was loaned to a payday lender called Uncle Buck.

The opening stanza of the administrators’ potted history reads bizarrely like marketing copy.

The initial target for the business was to provide everyday investors with fixed interest returns, that were easy to understand, using fixed income investments with no additional fees involved.

What this nonsense has to do with Basset & Gold, which gave its investors little chance of understanding that they were investing almost all of their money in a single payday lender, or that “no additional fees” meant 20% of investor monies would be paid to companies controlled by B&G owner Hadar Swersky as commission, is unclear.

The administrators continue:

B&G achieved its targets and provided significant growth year on year.

The only thing that was actually growing was B&G’s debts to investors, from £2m in 2016 to £36 million in 2020. B&G’s (virtually) sole debtor, Uncle Buck, made a loss in all of the four financial years up until it went bust, with its net liaibilities deteriorating from minus £1.4 million in March 2017 to minus £20 million in February 2020.

In April 2019 Basset & Gold stopped marketing its bonds as the FCA started nosing around after the collapse of London Capital & Finance.

Basset & Gold employed an independent firm to carry out a due diligence exercise into Uncle Buck.

They concluded that Uncle Buck would only repay its loans if new money continued to flow in from B&G.

It is believed that the completed independent business review concluded that UB should be able to repay the debt due on time but this was contingent on B&G continuing to fulfil its obligation to UB by virtue of continuing to fund UB’s activities as a HCSTC [payday loans] provider.

In June 2019 B&G were contacted by the FCA who raised concerns about Uncle Buck’s negative balance sheet and bad debt provision. B&G commissioned another independent review, which “portrayed a positive situation with minimal issues identified in respect of UB’s systems and processes”. This failed to mollify the FCA.

Towards the end of 2019 Uncle Buck were supposedly confident of finding £3 million a month worth of lending which would allow it to become profitable. However, in March 2020, “for reasons yet to be explained to the Administrators”, Cypriot shell company River Bloom called in the loan to Uncle Buck, which it was unable to repay, and the jig was up.

hadar-swersky
Basset & Gold owner Hadar Swersky

Note that as per a diagram in Appendix B, Basset & Gold = River Bloom = River Bloom UK Services = entities controlled by serial entrepreneur Hadar Swersky, which raised money from investors and loaned them to Uncle Buck, a company controlled by a Steven Murray.

While the administrators have managed to recover £2.3 million in cash, they do not expect “any material recoveries for bond holders from the Administration of Uncle Buck”.

Investors hopes for recovery rest largely on the FSCS. Despite minibonds not being covered by the FSCS, Basset & Gold representatives marketed their bonds specifically on the possibility of FSCS compensation if things went south.

Back in 2018, an investor was told by Basset & Gold’s official Facebook channel:

May I add that we are covered by the FSCS in the unlikely eventually of a mis-selling of one of our products. We to date have a 100% payment track record, and have a 98% recommended service rating from almost 200 of our investors. Lastly all our investments are 100% asset backed. Hope this provides more context.

Given Basset & Gold’s systematic use of misleading literature, which banged on about its irrelevant “100% payment track record” and compared its investments to cash deposits, all identified by the FCA as misleading practice, you’ll struggle to find a Basset & Gold “everyday investor” who won’t claim they were missold.

Still, it’s not all bad – thanks in part to sponsorship money funded by Basset & Gold investors, West Ham FC have successfully kept themselves in the Premier League to entertain us all next season. Which, if claims on the FSCS are successful en masse, will be converted into another load of subsidy from the general public. Up the Sc… I mean Hammers!