Adelpha Capital – we review their unregulated bonds paying 4.5% – 6.5% per annum

November 7, 2018November 6, 2018 ~ Phoenix ~ Leave a comment

Adelpha Capital is offering unregulated bonds paying interest as follows:

30 Day access bond – 4.5% per year quarterly income
18 month bond – 5.5% per year for quarterly income or 5.6% if rolled up and paid out at the end
3 year bond – 6% per year for quarterly income or 6.5% if rolled up and paid out at the end
5 year bond – 6.5% per year for quarterly income or 7.6% if rolled up and paid out at the end

Adelpha Bond plc has an FCA-regulated sister company, Adelpha Capital Limited, which is an appointed representative of Met Facilities LLP. Adelpha Capital Limited has prepared and issued Adelpha Capital plc’s financial promotions. The investment itself however is unregulated; it is only the investment literature that has been produced by a regulated company.

Who is Adelpha Capital?

Companies House shows that Adelpha Capital Limited is wholly owned by Managing Director Lucas Vellely. Adelpha Bond plc is 100% owned by Adelpha Financial Group Limited, which is also 100% owned by Lucas Vellely.

Photographs provided on adelphacapital.com for both Lucas Vellely and the other director Lisa Kelleher proved to be stock photos as at 5 November 2018.

vellely photo1 — The poor quality of the above is as per the original website.

lucas vellely stock photo — Small sample of reverse Google Image search for the above photo.

Investors should think very carefully before handing over money to an investment company which is not upfront about its ownership.

Adelpha Capital Limited was incorporated in October 2016. Its first accounts were filed with Companies House in October 2017 and showed it had minus £6,229 in net assets. Adelpha Bond plc and Adelpha Financial Group Limited incorporated in May and April 2018 respectively and are too young to have filed accounts.

How safe is the investment?

Investors’ money will be used to lend either directly to individuals and businesses, or via “lending partners” including Peer to Peer lending platforms.

If Adelpha Capital fails to make sufficient returns from its lending business, there is a risk that they may default on payment of interest and capital to investors.

Adelpha Capital’s website and Offer Document is heavy on the use of the words “security” and “secured”. Its “about us” page uses the words “secured” or “security” three times, while “risk” is not mentioned until a risk warning at the end.

The risk warning at the bottom of each website does make clear that “Capital is at risk and returns are not guaranteed”.

Under the “security” tab on its website, it states

An Adelpha Bond is secured bond. [Sic – Brev] This means the bond is secured against/backed by the assets of Adelpha – the underlying lending portfolio – through a security document. In the unlikely event Adelpha is not able to make a bond payment, investors have a claim over Adelpha’s assets in order to help them get their money back.

The risk is that if Adelpha is unable to make repayments to its investors, its own borrowers may not be making sufficient repayments to Adelpha in turn, and the value of Adelpha’s assets – which is its lending portfolio – may not be sufficient to get their money back.

Investors in asset-backed loans have been known to lose 100% of their money (e.g. Providence Bonds and Secured Energy Bonds) 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).

We are not in any sense implying that the same will happen to investors in Adelpha Capital, 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 undertake professional due diligence to ensure that in the event of a default, Adelpha’s assets are valuable and liquid enough to raise sufficient money to compensate all investors.

Should I invest in Adelpha Capital?

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 corporate bond, 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 yields of up to 7.6% a year should be considered high risk. As an individual, illiquid security with a risk of total and permanent loss, Adelpha Capital’s bonds are 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?

The investment may be suitable for high net worth and sophisticated investors who will already be well aware of all of the above risks, are looking to invest a small part of their assets in corporate lending, have done sufficient due diligence, and feel that the return on offer (up to 7.6% over five years) is sufficient for the risks involved in lending to a new startup company.

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

REWS (Renewable Energy and Waste Solutions UK plc) files December 2017 accounts; further investment needed

November 5, 2018October 23, 2018 ~ Phoenix ~ 1 Comment

In August REWS (Renewable Energy and Waste Solutions UK plc), which has raised funds via a series of bonds paying between 8% and 20% per year, filed its accounts for the period ending December 2017.

The company was incorporated in February 2017 and 2017 was, in the directors’ words, “a building year”. The company is building a waste processing and energy production facility and expects to roll out its product in the last quarter of 2018.

As you would expect, the company made no revenue in 2017 as its plant was still under construction, and posted a £378k net loss.

The accounts reveal (under note 14) that the company had raised £2.8 million from investors as at December 2017, of which a quarter (£724,000) was paid out in issue costs (i.e. commission, accounting fees, legal fees, printing costs etc).

The £724,000 of issue costs has been charged to the profit and loss account as a finance cost rather than as a liability on the balance sheet.

At December 2017 the company had net assets of minus £366k, representing roughly £1.5m of property, plant and equipment, £460k of other assets (e.g. VAT receivables and prepayments), minus £2.1 million of investor loans (not including the £724,000 issue costs which as mentioned above is charged to the profit and loss account) and £216,000 trade and other creditors.

As at December 2017, the company still needed to raise further funds to complete the construction of the energy production facility. The auditors note that this creates a material uncertainty over whether REWS will be able to continue as a going concern.

1.2 Going concern

These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the Group will continue in operational existence for the forseeable future. However, the directors are aware of certain material uncertainties in respect of its asset under construction which may cause doubt on the Group’s ability to continue as a going concern. The uncertainties are in respect of the funding and the implementation of the asset under construction which are described in critical accounting estimates and judgements as per note 3 below.

[…]

3 Critical accounting estimates and judgements

[…] Asset under construction

The main asset of the Group is the waste processing and energy production unit which is being constructed. The stage of the construction has been regularly monitored and in the directors’ opinion, good progress has been made and the unit is on budget and schedule. It is envisaged that further funding will be obtained to enable the unit to be completed in the second half of 2018.

Whether REWS succeeds in raising further funds, completing the facility and bringing it on stream on schedule will likely become clear in 2019, when c. £1.3 million of its bonds fall due for repayment (around 45% of its borrowings as at December 2017). The next accounts will be due at the end of June 2019.

MJS Capital issues rambling announcement explaining its name change to Colarb Capital, claims its investment is “near riskless”

November 2, 2018November 1, 2018 ~ Phoenix ~ Leave a comment

A couple of weeks ago we noted the name change of MJS Capital to Colarb Capital. At the time of writing the mjs.capital site had been withdrawn and no website was available for Colarb Capital.

The mjs.capital website has now been restored, with a pop-up explaining the reason for the name change and a redirect to the new website, colarb.capital.

MJS Capital Plc is a UK company setup in March 2015 the decision to call our company MJS Capital was not our original choice instead we chose Fidelity One Capital however regulators at the time felt this was to similar to that of another well know finance firm and we would have to choose another. [Sic. Honestly. -Brev]

MJS / Colarb has never been a regulated investment firm. I assume by “regulators” they mean it was Companies House who objected to their choice of “Fidelity One”.

How MJS’ directors managed to work in finance without hearing of Fidelity International, one of the world’s biggest investment firms with over $400 billion under management, is beyond me. I also find it difficult to imagine that they thought that naming an investment firm “Fidelity One” wouldn’t be considered too close to Fidelity.

Since the company was incorporated a number of changes have come into place and our board has changed too with this in mind we have felt the old name does not reflect our company’s new direction.

Our new strategy now involves collaborating with various company’s [sic – Brev] and assisting their endeavours by utilising our existing arbitrage strategy and so our new company name will now be known as ColArb Capital.

Collaboration + Arbitrage = ColArb

The new colarb.capital website largely repeats some high-level details about MJS / Colarb Capital’s bonds. It also claims that the strategy currently used by Colarb Capital is “almost riskless”.

Our Strategy

There are a number of Arbitrage strategies, but pure Arbitrage is considered by many as a riskless form.

Investopedia defines Arbitrage as: “occur[ring] when a security is purchased in one market and simultaneously sold in another market at a higher price, thus considered to be risk-free profit for the trader”. […]

The Algorithm

Colarb Capital Plc has recently developed an exclusive contract with a team of coders, made up of 15 highly skilled and qualified members who have helped create a series of algorithms that have taken Colarb Capital Plc’s existing strategy and enhanced its ability to find price differences in the markets thousands of times over.

Colarb Capital Plc has recently audited the performance of its strategy through professional auditors based in London, and their findings reaffirm our statement that pure arbitrage is near riskless.

Of the 50,000 trades executed, auditors found more than 90% of trades had shown a positive performance but, most importantly, 0% of trades had shown losses and, in their opinion, they considered the strategy to be “almost riskless”.

MJS / Colarb’s website is technically correct that an arbitrage strategy can be “almost riskless”. (If I can buy on one exchange at $1.30 and sell on another at $1.40, this is almost riskless as long as I can move quickly enough to take advantage.) However, it does not address the fact that raising money through a loan note paying, say, 9.85% per year, and then using the money to invest in arbitrage, is most definitely not almost riskless, because I have to find enough arbitrage opportunities to generate sufficient money to pay my bondholders 9.85% per year.

Needless to say this is not easy, and if I fail to make sufficient returns from arbitrage to pay bondholders 9.85% per year and meet my own costs, there is a risk of default.

90% positive trades?

This mention of a firm of professional auditors finding that more than 90% of Colarb Capital’s trades were positive and 0% were negative sounds eerily familiar:

fortitude auditors — Letter from RPG Crouch Chapman LLP provided to us by an introducer promoting Fortitude’s bonds. Note that Fortitude is (according to its director Ajaz Shah) completely separate to and uninvolved with MJS / Colarb.

Bearing in mind that the director of Fortitude Capital, former MJS-director-for-a-day Ajaz Shah, has recently confirmed that Fortitude is completely separate from and has no dealings with MJS / Colarb, it seems a remarkable coincidence that both Fortitude and MJS / Colarb have had exactly the same success rate confirmed by their accountants, using the same “delta neutral” strategy.

And, of course, the million-dollar-question is – if Colarb’s strategy is almost riskless and has been doing so well, why have some investors not been repaid on time?

First Alternative Group disappears without trace

November 1, 2018October 12, 2018 ~ Phoenix ~ 3 Comments

representative — Have you seen this man?

First Alternative Group, which offered a “secure” spread-betting investment paying 3 – 6% per month, has (astonishingly) disappeared from the Internet.

The registration of firstalternativegroup.com was last updated on 11 August 2018 and remains anonymous. Google’s cache shows that the website was still operational on 21 August 2018, but it has since been replaced with a blank page and internal pages have been removed.

How do I get my money back from First Alternative Group?

UK investors should contact Action Fraud.

Recovery is unlikely in the extreme, and anyone who handed money to First Alternative Group should assume it is gone forever.

Grove Developments bonds a scam?

October 30, 2018October 29, 2018 ~ Phoenix ~ Leave a comment

Back in February I reviewed a bond supposedly being offered by Grove Developments, an established property company which is part of the Arora Group.

I noted a number of discrepancies in the literature, most notably that parts had been copied and pasted from Blackmore Bonds and at least one other unrelated investment, despite significant parts of this copypasta being irrelevant, and that a picture of a Grove Developments director differed from their own website.

My suspicions were recently raised again when Grove Developments released their latest accounts, which appeared to contain no indications of any bond raise.

I then noticed that the literature for the investment directed investors to grove-fund.co.uk. This website is now down, and differs from Grove Developments’ usual website (thearoragroup.com).

A phone number provided on the literature is still answered by someone answering the phone as “Grove Developments” but I did not pursue the call further.

Given the numerous discrepancies in the literature, and the fact that it uses a different website to the official Arora Group website which is now down, I am concerned that the “Grove Developments” bond may have been a simple fraud which was nothing to do with the real Grove Developments, and that any money invested in it has simply disappeared.

I have asked the Arora Group for confirmation but at time of writing they have not replied.

In the meantime, investors should not invest until The Arora Group has cleared up whether the bond is genuine.

A comment left on the original article confirmed that the “bond” was being actively marketed via cold-calling at the time.

RVS Closing Price System disappears with investors’ money

October 29, 2018October 24, 2018 ~ Phoenix ~ 1 Comment

A few months ago I reviewed the RVS Closing Price System, which claimed to enable users to generate returns of 225% per annum through share trading.

I concluded that investors should not invest unless they expected to lose all their money.

Others have commented that the RVS Closing Price System appeared to be a reboot of the HSL Smart Market System, to which it showed remarkable similarities, although I didn’t include this in the review as a) I couldn’t 100% verify it and b) it seemed unnecessary.

The anonymous admins of RVS Closing Price System have now apparently done a runner. The website https://price-systems.com/ shows a blank page, and an investor has informed me that RVS admins are not responding to calls or emails.

It appears that RVS investors have lost the money they invested in the software.

How do I get my money back from RVS Closing Price System?

Investors in the RVS Closing Price System should take extreme caution if someone contacts them claiming that they can recover their funds. It is highly likely to be a fraud recovery fraud. They will eventually ask for “legal fees” or “liquidation fees”, which investors will never see again.

If you fell for the RVS Closing Price System fraud then you are vulnerable to losing money in similar scams in the future. Consider changing your phone number or email addresses, as these will now be on a “suckers list”.

If you paid for RVS’ software via a credit card or debit card, you may be able to make a claim under “section 75” (credit cards) or “chargeback” (debit cards). (Non-UK investors should check the protections applying in their own country.) Note that chargeback and section 75 claims never cover losses from trading or investing. However, the sale of goods which are not as described is potentially covered by section 75 and chargeback.

As RVS undertook to supply software which promised guaranteed returns from trading, you might be able to make a successful claim if you can persuade the debit / credit card company that you paid for software which was sold fraudulently and not as described.

Given that this scam appears to have successfully worked twice in quick succession, look out for another company with a three-letter acronym promoting some kind of trading software offering implausible returns to emerge in the near future…

London Capital & Finance delays filing accounts

October 26, 2018December 12, 2018 ~ Phoenix ~ 1 Comment

London Capital & Finance has delayed filing its accounts for the period ending April 2018 by using a well-known (among accountants) loophole in the Companies Act.

Traditionally, public limited companies are supposed to file their annual accounts within six months of their accounting end date. This means London Capital & Finance’s April 2018 accounts would have been due for filing by the end of October 2018.

However, less than a couple of weeks before this deadline expired, London Capital & Finance shortened its accounting reference date by a day, which under UK companies law gives it a further three months to file its accounts, i.e. 17 January 2019.

London Capital & Finance previously used this loophole twice to put off filing its April 2017 accounts, shortening its accounting period in October 2017 and then again in January 2018. The April 2017 accounts were eventually filed in February 2018.

London Capital & Finance is one of the most well known issuers of unregulated bonds directly to high-net-worth and sophisticated investors. As at April 2017 it had raised £60.8 million from investors, of which £11.3 million was paid out in unamortised costs (which covers commission, accounting fees, printing costs, etc), leaving it with £49.5 million on the balance sheet. At the same date it had £50.6 million in total assets (mostly representing its secured loans business) and its net assets were £299,000. As at October 2018, LC&F’s website says that it has raised £214 million to date.

Why it has again needed to put off filing its accounts is not known.

Independent Portfolio Managers gets last-minute reprieve, status of compensation payments still unknown

October 25, 2018October 24, 2018 ~ Phoenix ~ 1 Comment

Four days before it was due to be dissolved over its failure to file annual accounts with Companies House, Independent Portfolio Managers has had the strike-off action against it suspended.

The reason the action has been suspended is not known for certain, but the most likely reason is an objection by a creditor. If IPM had been dissolved, all its assets (if any) would have become property of the UK Government.

As I previously covered, in July and August IPM was ordered by the Financial Ombudsman to compensate three investors in Secured Energy Bonds for its failings in producing Secured Energy Bonds’ literature, and for giving a false impression that Secured Energy Bonds were more secure than other unregulated corporate loan notes.

Since August 1st, no further decisions have been published by the Ombudsman relating to Independent Portfolio Managers, despite the numerous similar cases that potentially exist against IPM for its role in Secured Energy Bonds and Providence Bonds. Three potential explanations for this are:

those were the only three investors who complained (I find this a bit unlikely given the number of investors who lost money in the aforementioned bonds, who have a well-organised action group)
other Financial Ombudsman cases against IPM are still in the queue or being reviewed
IPM has given up contesting cases against it at Ombudsman level. Financial Ombudsman cases are initially judged by an adjudicator, after which the losing party can request a review by an ombudsman. A case is only published publicly at ombudsman-decisions.org.uk if it goes to ombudsman level. If the decision of the adjudicator is accepted by the losing party, it remains unpublished.

The investor action group has declined to comment on whether any investors have actually received payouts from Independent Portfolio Managers. Ostensibly their spokesman did not wish to discuss the matter with an anonymous writer. I have to wonder if the fact that I have a downer on their prospects of eventually being compensated by the Financial Services Compensation Scheme may also have something to do with it.

Independent Portfolio Managers Limited remains overdue with its annual accounts and Companies House may resume the strike-off process at a later date. The directors are in theory also open to criminal charges for failing to comply with their legal duties.

Just ISA – we review their IFISA bonds paying 8% per year over five years

October 23, 2018 ~ Phoenix ~ 2 Comments

Just ISA is offering five year bonds paying interest of 8% per year.

Money invested in Just ISA (a trading name of Just ISA Bond Co 1 Limited) will be loaned to an operating company in Jersey, which in turn will finance litigation funding, specifically in the area of professional negligence.

Just ISA is not to be confused with Just Group plc (a much larger FTSE-listed provider of annuities and other retirement products).

Who is Just?

Rob Rutter Just owner — Rob Rutter, Just ISA director and owner

Just ISA Bond Co 1 Limited is 100% owned by Creative Litigation Funding Solutions Limited, which is in turn 100% owned by Robert Rutter. Both companies were incorporated in early 2018 and are yet to file accounts with Companies House due to their young age.

Investors can access Just ISA’s bond via an IFISA wrapper provided by Northern Provident Investments Limited. Northern Provident Investments provides ISA wrappers for a number of IFISA bond investments under its umbrella; according to the FCA Register, its current trading names include Northern Provident Investments Limited, Barbican ISA, Capital Bridge ISA, Choices ISA, Fluid ISA, Just ISA and Prime ISA.

While Northern Provident Investments Limited is regulated by the Financial Conduct Authority as an ISA manager, Just ISA Bond Co 1 Limited and its associated companies are not regulated by the FCA.

How safe is the investment?

Just ISA, along with other capital-at-risk IFISA bonds under the Northern Provident Financial umbrella, is currently being promoted by unregulated introducers to UK investors searching on Google for cash ISAs.

Cash ISAs — Top: Google search result for “cash ISAs”. Bottom: Screenshot of the top sponsored result, bestrateisa.co.uk. No risk warnings are included anywhere on this website.

These adverts are taken out by introducers independent of Just ISA and Just ISA cannot be held responsible for misleading promotions such as this one.

It is very important that investors understand that these investments are corporate loans and if Just ISA defaults you risk losing up to 100% of your money. They are not like regulated cash ISAs (e.g. those offered by the Post Office, Skipton and Barclays) which are covered by the FSCS up to £85,000 if the authorised deposit-taker defaults, and are virtually free of investment risk if you remain within the £85,000 limit.

The purpose of Just ISA’s bonds is to allow its sister company in Jersey to fund litigation in professional negligience cases.

If Just ISA fails to make sufficient returns from their litigation funding, or for any other reason Just ISA runs out of money to service these bonds, there is a risk that they may default on payments of interest and capital to investors.

After The Event Insurance

Just ISA aims to mitigate risk by only funding cases that it believes are likely to succeed and have a strong possibility of being settled within 24 months. It will also only fund cases where After The Event insurance can be obtained, which means that if the case fails in court, Just ISA should receive its investment back from the insurer.

Investors should not assume that because Just ISA’s cases are covered by After The Event insurance in place, there is no risk of losing money.

By putting ATE insurance in place, Just ISA aims to mitigate the risk of losing money where its cases fail in court. However, merely not losing money is not sufficient for this investment to succeed. Just ISA needs to make enough money from its lending business to meet its set-up costs, salaries and other overheads, and then pay investors 8% each year, in order to be able to pay investors’ interest and capital on time.

There is also a risk that the insurer may not pay out (although Just aims to insure across AA, A+ and A- rated insurers).

Just ISA’s literature boasts of a “case win rate of 90%”. Given that Just ISA and its associated companies have only been running for about half a year at time of writing, and court cases are not short affairs (Just ISA says elsewhere that it targets cases that are likely to be settled within 24 months), this statistic seems somewhat meaningless. Even if Just ISA has managed to already conclude some of its cases in such a short space of time, it seems too premature to publicise their success rates as representative.

Should I invest in Just ISA?

Any investment offering yields of 8% a year should be considered high risk. As an individual, illiquid security with a risk of total and permanent loss, The Capital Bridge’s bonds are 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?

The investment may be suitable for high net worth and sophisticated investors who will already be well aware of all of the above risks, are looking to invest a small part of their assets in corporate lending, and feel that the return on offer (8% over five years) is sufficient for the risks involved in lending to a small unlisted company.

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

Buy2LetCars files 2017 accounts

October 18, 2018January 5, 2021 ~ Phoenix ~ Leave a comment

Buy2LetCars, which offers unregulated investment in cars paying up to 11% per annum, has filed its accounts for the period ending December 2017.

There are three companies in the Buy2LetCars group: Buy 2 Let Cars Limited, Rent 2 Own Cars Limited and Raedex Limited. Raedex Limited is the holding company for the first two.

Due to its small size, the companies’ accounts were exempt from independent auditing, and the information that can be obtained from them is limited.

At the balance sheet date of 31 December 2017, the liabilities of the holding company exceeded its assets by £2.9 million. This was an improvement from December 2016 when net liabilities were £6.8 million. A large contribution to this improvement was £4.8 million of goodwill which was put on the books in the 2017 financial year, described as “the expected value of future profits dervied from existing contracts”.

Again due to its small size, the three companies did not have to file a profit and loss account. However, the profit and loss position is briefly referred to in the notes to the Raedex Limited accounts, which state that Buy 2 Let Cars Limited made a net profit of £261k while Rent 2 Own Cars Limited made a £3.6 million net loss. In 2016 Buy 2 Let Cars made a net profit of £191k while Rent 2 Own Cars Limited made a £2.8 million net loss.

The 2018 accounts will be due for filing in September 2019.