We review Next Gen Solicitor’s bonds paying 8% over 12 months

Next Gen Solicitors logo
~ Phoenix ~ 2 Comments

Next Gen Solicitors offers an unregulated investment in litigation financing paying interest of 8% per year for an investment of 12 months.

Unregulated third-party introducers promoting Next Gen Solicitors claim that its investment is “pandemic and recession proof” and “investor capital is 100% covered under the ATE [After The Event] Insurance policy”.

Who are Next Gen Solicitors?

Next Gen Solicitors owner Karen Smith

Next Gen Solicitors is wholly owned (via Simple Legal Solutions Limited) by director Karen Smith.

Next Gen’s last accounts (February 2019) show limited information and were unaudited, due to the use of small company exemptions. Those accounts show the company to be £93,000 in the red (negative net assets) and to have made a loss of £103,000 in the preceding year (based on the movement in “retained earnings”; the company did not file a profit and loss account).

How safe is the investment?

Next Gen Solicitors states that “Investor security is the Company’s priority”. Unregulated introducers claim “investor capital is 100% covered” by After The Event insurance policies (which pays out should Next Gen Solicitors fail to win their cases).

Nonetheless, like any unregulated investment paying 8% per year, this is an inherently high risk investment with an inheret risk of total loss.

It is not enough for Next Gen Solicitors to win their cases, or failing that claim “After The Event” insurance: to return investors’ money, Next Gen Solicitors have to generate sufficient returns to pay investors their 8% per year, after their own costs.

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 Next Gen Solicitors, only illustrating the risk that is inherent in any loan note even when it is a secured loan.

The After The Event insurer is only liable to pay Next Gen Solicitors their legal costs should their cases fail, not to compensate investors if for any reason Next Gen Solicitors runs out of money to meet its debts.

Should I invest in Next Gen Solicitors?

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 8% per year is inherently high risk. As an individual, illiquid security with a risk of total and permanent loss, Next Gen Solicitors’ 12 month loans are 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?

If you are looking for a “capital protected” investment, you should not invest in loans to unregulated companies with a risk of 100% loss.

Fake Bond Review Twitter account warning

~ Phoenix ~ 5 Comments

A Twitter account “@InsideLeft3” run by a racist has taken to claiming to be myself (and an unrelated third party).

@InsideLeft3 previously claimed to be an ex British Army soldier called “Second Lieutenant Powley”. This could of course be just as much a fantasy as him being myself.

@InsideLeft3 is also an anti-Semitic racist.

Bond Review has three active media channels: this website, the email account linked to it, and the Twitter account @BondReview. Any other social media profiles should be assumed fake unless confirmed here.

The fake account has been reported to Twitter but I’m not expecting any action to be taken any time soon.

We review Diamonds4profit – anonymous diamond investment

Diamonds 4 Profit logo
~ Phoenix ~ 2 Comments

Diamonds4profit sell diamonds as an investment, claiming to offer “lower risk vs higher yield balance”.

The company is currently running ads on Facebook. Ads for the sale of commodities are effectively unregulated, as UK law treats them as selling shiny stones even when they are being sold as an investment. (The only relevant regulator is the Advertising Standards Authority, which is virtually toothless.)

Who are Diamonds4Profit?

No details of who is behind the business are provided on Diamonds4profit’s website, and no corporate identity is disclosed. On Facebook, the contact email for Diamonds4profit is listed as “james@”.

The registry information for diamonds4profit’s website shows it to have been registered in the name of a company called “Magna Cogitare Limited” in April 2020. This is despite the fact that no such company existed. There was a Magna Cogitare Ltd registered in the UK but it was dissolved in February 2020.

Interestingly, Magna Cogitare’s sole director and owner was a James Ian Hobson. Due to the lack of disclosure from Diamonds4Profit, whether Magna Cogitare’s James Hobson and Diamonds4Profit’s James are the same person is not definitive.

If an investment company is not upfront about details of its ownership, think very carefully before handing over any money.

How safe is the investment?

Diamonds4profit claims that diamonds offer “lower risk vs higher yield” and “provide a safe haven in a turbulent time for equities”.

This is baloney. Diamonds are a commodity and like all commodities will fluctuate in value. If they were guaranteed to go up in price, Diamonds4profit would hold on to them and pocket the profit instead of flogging them to random investors on Facebook.

What frequently happens when you buy diamonds from anonymous people on the Internet is that even assuming you receive the diamonds, and they are as described, they will be sold at such a high markup to their value that the chance of the diamonds going up enough in value to overcome the markup is virtually nil.

Anyone serious about investing in diamonds would employ a valuer, paid by themselves (not Diamonds4profit), to check that the diamonds were as valuable as the seller says – just as when buying a house as an investment, you would employ your own valuer and not simply assume that it’s worth as much as the seller and the estate agent says it is.

The worst case scenario is that you hand your money to Diamonds4profit and they disappear or go bust before fulfilling your order, leaving you with no diamonds and a total loss. This is not an accusation but an inherent risk when dealing with small obscure companies (especially anonymous ones).

Should I invest in Diamonds4profit?

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 individual commodities, 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.

Despite Diamond4profit’s claim to the contrary, handing money to anonymous people on the Internet in exchange for diamonds 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 paid a professional valuer working on my behalf to check the asset is worth what the seller says it is?

If you are looking for a “lower risk” investment, you should not invest in commodities bought from anonymous websites.

London Property Bonds (now LP Bonds plc) given strike-off notice, accounts overdue

~ Phoenix ~ 5 Comments

A year and three months after it fell overdue with filing its November 2018 accounts, LP Bonds plc (formerly London Property Bonds) has been issued with a strike-off notice by Companies House.

If the company continues to fail to meet its legal obligations and there are no objections, the company will be struck off the register and all its assets will be forfeited to the Government (though this can be reversed).

LP Bonds raised just under £500,000 from the public in bonds paying 8% per year in 2016, which are due for repayment next year.

This is the company’s third strike-off notice in its short history. The previous two related to failure to file up to date details of the company’s ownership (and were withdrawn after this was belatedly rectified).

In May 2019, just before the November 2018 accounts became due, the company used a loophole in the Companies Act to delay filing its accounts for three months, by amending the accounting year end date by a single day. This extended the May deadline to August 2019. Although there was nothing to stop LP Bonds using the year-end trick again last August, it apparently forgot to do so, thus it has been legally overdue for a year and three months.

Bentley Global issued with strike-off notice by Government, accounts overdue

Bentley Global logo
~ Phoenix ~ 4 Comments

Bentley Global has been issued with a strike-off notice by Companies House after failing to file up to date annual accounts since May 2020.

Unless the company files its accounts, or a creditor or other third party successfully objects to the striking-off, Bentley Global will be removed from the register and all its assets will become legally property of the Government (though this can be reversed).

Bentley Global raised £4.8 million from bonds paying up to 20% per year which were promoted by former Manchester City and England midfielder Peter Reid, as well as an unregulated introducer who claimed that “security is a key element” for its inherently extremely high risk bonds. Money raised was to be used to bet on football using Bentley Global’s “Algo88” algorithm.

Bentley Global claimed in investment literature that it would provide “fully audited” performance figures. Not only has it not done this (at time of writing, its website still shows some backtested – i.e. simulated – results from 2013-2017 rather than actual past performance) but it hasn’t even managed to comply with its legal duties to file at least some sort of annual accounts for the year ending August 2019. Failing to file annual accounts on time is a criminal offence under the Companies Act.

Actual performance = ?

We review Kenton Finance’s “accounts” paying 5.82 – 9.96% per year

Kenton Finance logo
~ Phoenix ~ 8 Comments

Kenton Finance is currently offering two unregulated “accounts” (actually corporate loan notes):

  • Standard Account: 2 year investment paying 5.82% per year on a monthly basis
  • Silver Account: 3 year investment paying 9.96% per year on a quarterly basis

Investors’ funds are used to supply bridging loans to property developers.

The loan notes are currently being promoted by unregulated introducers to their mailing lists.

Who are Kenton Finance?

Kenton Finance is headed by self-confessed “likeable loony” Kenton Hackney.

Kenton Finance owner Kenton Hackney

Hackney divides his time between bridging loans and being a wine merchant. Hackney’s LinkedIn page does not mention Kenton Finance but does list him as MD of 3squireswines and director of St James Winery (which appears to be defunct).

Kenton Finance is a trading name of KKH Holdings Limited. While the company was incorporated in 2015, Kenton Finance’s website was only registered in November 2019. The accounts to November 2018 show net assets of -£1,584 on gross assets of £182k, but in November 2019 net assets jumped to £6 million, mainly due to an injection of share capital. The accounts reveal very little useful information due to Kenton Finance using small-company exemptions, but they paint a picture of a company that only recently ramped up its activity in late 2019, notwithstanding its being incorporated in 2015.

The company claims in press releases to have lent out a total of £375m which is very different from the picture painted by its statutory accounts.

How safe is the investment?

Kenton Finance claim to offer a “great rate for your savings” and to offer “Full bricks and mortar backed security”.

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

The company claims a “100% TRACK RECORD of repaying external investors all their capital and interest” but does not make clear that past performance is no guide to the future. A 100% track record is meaningless as a) if they had defaulted on even one investor, they would likely be in administration and not soliciting new investment from the public b) Kenton Finance’s accounts suggests it has only recently had any substantial external investment.

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 Kenton Finance, 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 Kenton Finance) to confirm that in the event of a default, the assets of Kenton Finance would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Kenton Finance tells them about their assets.

The disconnect between the 2 year and 3 year rates on offer is bizarre. You would normally expect a much narrower gap between the rates on a 2 year and 3 year investment. For the rates to be fair to 2 year “standard” investors, there would have to be a much higher risk of the company defaulting in year 3 than years 1 and 2. Why this would be is unclear.

Should I invest in Kenton Finance?

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 9.96% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, lending money to Kenton Finance 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 “secure” investment, you should not invest in unregulated loans with an inherent risk of 100% loss.

Krono Partners update: management team member charged with securities fraud

Krono Partners logo
~ Phoenix ~ 3 Comments

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

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

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

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

Debo is also a director of Company Y.

The U.S. Securities and Exchange Commission alleges:

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

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

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

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

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

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

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

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

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

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

Blind item: Which EIS scheme is fraudulently claiming Advance Assurance it hasn’t got?

~ Phoenix ~ 5 Comments

A reader emailed me recently to allege that a certain “EIS” scheme was taking money from investors under the pretense of having Advance Assurance from HMRC, when in reality it had been told that it would not be EIS-eligible.

EIS is a tax relief scheme implemented by the Government to encourage wealthy and sophisticated investors to invest in high-risk early-stage companies. To be eligible for EIS relief, companies must not be too large (in terms of both money and number of employees), must use the money raised in a certain way, and the investment must genuinely be at risk.

Investors who invest in EIS-qualifying companies get money back on their income tax bill, can defer a capital gains tax bill, get Inheritance Tax relief, and if the EIS goes poof (as many inevitably will, such is their high risk nature), they can get tax relief on their losses as well.

None of these reliefs would be very attractive if investors couldn’t be certain whether they actually applied. They can’t exactly be expected to go to the premises and count up the number of employees. To solve this problem, companies can apply for “Advance Assurance”, whereby they supply full details of their investment to HMRC, who confirm whether or not it should qualify for EIS relief.

EIS schemes don’t usually feature on Bond Review because the letters “EIS” should be their own risk-warning. And I don’t publish anything that can’t be verified externally, so while whistleblowing is a noble and worthy cause, this isn’t the place to do it.

The claim that the EIS Scheme X (as we’ll call it) was claiming Advance Assurance which it didn’t have piqued my interest, however. Firstly, if it was true, investors deserved to know. And secondly, it should be easy to verify by checking with HMRC. Just as you would if you wanted to know whether something was a genuine ISA or pension scheme.

So I asked HMRC’s Enterprise Centre whether EIS Scheme X did in fact have Advance Assurance. They replied:

You would need to approach the company directly regarding whether or not they have been issued an Advance Assurance.  HMRC is bound by customer confidentiality and is not permitted to divulge information in relation to a customer’s  tax affairs without appropriate authority. 

HMRC appeared to be under the impression that I had asked how much income tax my neighbour Bob had paid, rather than whether a company was fraudulently raising money from the public while putting words in HMRC’s mouth. I replied:

How can I verify whether a company claiming they have been issued Advance Assurance has actually done so or whether they are doing so fraudulently?

I also pointed out that EIS Scheme X had claimed to be “HMRC approved” in a public-facing YouTube video. (This can only be read as claiming Advance Assurance, as HMRC does not give any other kind of approval to EIS schemes.) Therefore, even if receipt of Advance Assurance status, or lack of it, could be confidential information, it ceased to be so after EIS Scheme X claimed it in public.

You don’t get to run around raising money from investors while telling them “A is true” and then claim that nobody’s allowed to point out “A is false” because of your right to privacy.

This hit a brick wall with HMRC.

Until such time as HMRC is presented with the appropriate authority HMRC is not able to comment for the reasons previously explained to you.

Where a company applies for and receives advance assurance it will be in receipt of an assurance letter issued by HMRC.  This can then presented to potential investors. As the transaction is a matter between the company and (potential) investors, where there is any doubts by the investor(s) it is the issuing company’s responsibility to allay any concerns in order to secure investment, hence the common practice of drafting subscription agreement etc.

This continues to miss the point that if investor is being told fraudulently by a company that they have Advance Assurance, asking the same company for more information or drawing up an agreement is completely pointless.

A common mistake by novice investors is to think that “due diligence” means asking questions of the company and letting them market at you some more, rather than independently verifying that what they tell you is accurate.

I wasn’t expecting HMRC’s Enterprise Centre to make the same schoolkid error.

If my reader was, for whatever reason, trying to defame EIS Scheme X, and they do in fact have Advance Assurance, then it’s no harm no foul.

If, however, their allegation is true, HMRC are allowing a fraud to take place. HMRC know for a fact whether or not they issued Advance Assurance to EIS Scheme X. They also know that EIS Scheme X is claiming Advance Assurance in public-facing promotions (because I told them). While HMRC appears not to have a legal duty to take action (there is no legal duty to report a crime), they shouldn’t need one.

It would be easy to say “Tough luck, EIS is supposed to be high risk, and the risk of the EIS turning out to be a scam is merely a subset of the wider risk that the EIS fails and you lose all your money. So HMRC is correct to pass the buck back to the EIS.”

But this is different because if EIS Scheme X is not in fact an EIS, investors won’t just lose their money, but they’ll get a nasty shock when HMRC turns down their claims for tax relief – especially if it results in interest and penalties. It’ll be an even nastier shock when they learn that HMRC knew that EIS Scheme X was defrauding them but didn’t lift a finger to stop it.

It is reminscent of the role HMRC played in the pension liberation scandal, when its policy of allowing anyone to register a pension scheme if they sent in two tokens from a packet of breakfast cereal exacerbated the losses from fraudsters setting up scam pension schemes, into which investors were duped into transferring their money. In 2013, HMRC tightened up the process of scheme registration, recognising that its previous process had been too lax; without, we should note, requiring any new legislation to do so. Better late than never.

HMRC’s current view that it’s not HMRC’s problem if an “EIS” is claiming HMRC gave them approval is reminiscent of its – now abandoned – view that it’s not HMRC’s problem if people are fraudulently setting up pension schemes.

As long as HMRC continues to take the view that it’s not its problem whether Advance Assurance is claimed fraudulently, Advance Assurance is effectively worthless unless the EIS manager is one of the big guns who has been around for donkey’s years and stands to make more money from being honest than committing fraud. Which is fine and dandy if you’re an Octopus or a Foresight, but rather contrary to the spirit of EIS.

More on this story if and when EIS Scheme X unravels. Unless of course my reader was defaming an innocent EIS scheme for no readily apparent reason, in which case this will never be brought up again.

Bond Review targeted by fraudulent DMCA takedowns

~ Phoenix ~ 3 Comments

Several Bond Review articles have been the subject of fraudulent DMCA takedowns recently.

The United States’ Digital Millennium Copyright Act allows the owners of copyrighted material to file takedown notices, asking Google or other web providers to remove the copyrighted material.

There is a way to abuse this process to trick Google into removing content from its web searches that you don’t want to be seen. This involves stealing the content from the owner, uploading it elsewhere, changing the date so that your stolen content appears to have been uploaded first, and then filing a takedown notice to Google, claiming that your stolen content is the original, and the real content is the copy.

Google has informed me that this has happened to three Bond Review articles that I know of:

It is likely that whoever is the real fraudster has repeated the tactic on innocent firms without their knowledge to make it impossible to identify them (unlike when Carlauren tried this tactic last year shortly before its collapse).

My articles were copied and pasted onto skeptictank.org, which claims to provide “Critical Examination of Doubtful Claims” but, rather ironically given its name, apparently allows third party posters to post articles without any checks.

Skeptictank.org has been informed and, to their credit, were very quick to respond and say that its legal counsel will take a look. They pleaded a high workload due to the US Presidential election. It matters little as the unknown perpetrators will probably remove their copies from Skeptictank themselves, now that they have succeeded in hiding my originals from Google.

Filing a false DMCA takedown requires committing perjury under the laws of the United States of America.

I am not in a position to take legal action as it would require waiving pseudonymity, as well as time and funds I don’t have.

Moreover, the last time this happened, the scheme responsible collapsed within months. Committing perjury under US law indicates a degree of desperation, and it’s safe to say that whoever is responsible has far more to worry about than I do.

Capital Way added to FCA scam warning list

~ Phoenix ~ 6 Comments

Ponzi scheme Capital Way has been added to the FCA’s scam warning list in two separate entries.

The two entries relate to two separate websites run by Capital Way, one of which claims a registration in the Marshall Islands and the other in Bulgaria.

Facebook’s “Page Transparency” feature states that one page admin is from Israel, giving another potential location for where Capital Way might be based from in reality. (Another admin’s location is “not available”.)

Capital Way claims bullshit return figures going back ten years, despite there being no evidence of it existing before early 2019. Its website currently claims to return 50% per year.

Capital Way operates illegally in the UK by selling its investment scheme while failing to register with the Financial Conduct Authority. Capital Way is not registered with any financial regulator, making it illegal in every country it is promoted in.

Capital Way has been frequently promoted on Facebook throughout its two-year history of scamming.