Author: Phoenix

We review Accumulate Capital’s unregulated loan notes

~ Phoenix ~ 10 Comments

Accumulate Capital are offering unregulated loan notes in their property business.

Current rates are only disclosed on providing contact details, however testimonials on their public website tout previous returns of up to 15% per year.

Accumulate Capital commissionsAccumulate Capital pays introducers up to 24% of investors’ money as commission, according to its website. Update 22.05.20: After this review was published the page in question promoting “up to 24% commissions” was removed from Accumulate’s website. This article was correct as at the date of publication. [end update]

Accumulate Capital describes its bonds as “the AAA – Asset Assured Accumulator” and “Unique to the Property Development market”. In reality Accumulate’s “Asset Assured Accumulator” are just a standard loan note with a charge over Accumulate’s assets.

Who are Accumulate Capital?

Accumulate Capital Limited was incorporated in April 2019, originally as EQT Capital, and is wholly owned by Paul Howells.

Howells was previously a Partner at Signature Capital. For some reason, Howells has attempted to scrub his history with Signature from the Internet, having removed his association from his LinkedIn profile and other websites such as Vimeo.

Accumulate Capital was originally incorporated by another Signature figure, Sarah Schofield, who was previously a director of two Signature companies. Howells took over the company in July 2019.

Signature Capital is currently in administration; administrators were appointed to the parent company Signature Living Hotel on 21 April.

How safe is the investment?

In a page aimed at its introducers (the ones getting up to 24% commission), Accumulate states

As with all investments and property purchase, security is the key priority. […] Whilst our funding remains ‘unsecured’ in the capital stack, the remaining funding – sourced from private and institutional investors (including high street banks and challenger banks) – is secured via charges registered with the UK’s Land Registry. When we couple that with our high levels of ‘contingency buffers’ within the costing of a scheme, it ensures our investors that their positions are indeed ‘secured’.

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 – a point Vala itself makes in its brochure.

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).

We are not in any sense implying that the same will happen to investors in Accumulate, 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 Accumulate) to confirm that in the event of a default, the assets of Accumulate would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Accumulate tells them about their assets.

Should I invest in Accumulate?

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 that offers returns 12.5% – 15% per year (to go by Accumulate’s advertised returns for previous investment projects) is inherently extremely high risk.

This goes double when an investment pays extremely high rates of commission to introducers. If Accumulate pays 24% of an investor’s money out as commission (to go by the figure on its own website), it has to make a 32% return before its own overheads and costs,  just to get back to where it started, before any interest is paid to the investor.

As an individual, illiquid security with a risk of total and permanent loss, Vala’s loan notes 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?
  • Have I conducted due diligence to ensure the asset-backed security can be relied on?

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

Administrators appointed to Signature Capital

~ Phoenix ~ 7 Comments

According to the Gazette, the parent company of Signature Capital, Signature Living Hotel Limited, has been put into administration.

Duff and Phelps were appointed as administrators. Other collapsed unregulated investment schemes currently administered by Duff and Phelps include Blackmore Bonds and Carlauren.

Signature’s problems paying investors have been well documented over the last year.

In January this year Signature Living Hotel took two investors to court in attempt to prevent them serving winding up petitions on the company. Both investors loaned money to Signature Heritage (Belfast) Limited, with a guarantee given by the parent company Signature Living Hotel.

Signature argued that the guarantee – a guarantee that Signature had made much of in its investment literature – was invalid, because it hadn’t been witnessed, despite it being signed by sole director Lawrence Kenright.

The judge “had no hesitation” in throwing out this argument and allowing the investors to proceed with their winding up petitions.

I reviewed Signature’s investments in May 2019. I pointed out that, despite Signature’s claims on its website to offer “a safe place [for money]” and “fantastic returns in a secure environment”, its investments offering rates of up to 16% per year were inherently high risk.

A couple of weeks after I posted my review, Signature’s lawyers took umbrage with this entirely factual description, and threatened to sue me for defamation.

You state that it is “misleading” for our client to promote its product as “safe” and “secure”. The quote you refer to was however given by a third party investor [Brev: this is irrelevant as Signature chose to use that testimonial in its marketing, and remains responsible for its own marketing] and our client maintains that the nature of the guarantee given to investors by Signature Living Hotel Limited gives significant comfort to their investors.

Your article wholly fails to explain that the loans are guaranteed by Signature Living Hotel Limited, a company that you do note has significant assets. Your failure to appreciate this may have clouded your judgment in relation to the investment generally.

So let’s recap: Signature paid money (actual investors’ money) to get their lawyers to threaten me with a lawsuit. On the grounds it was defamatory (it wasn’t) to describe their investments as inherently high risk (they were), because I hadn’t understood their super-duper corporate guarantee (I had).

Less than a year later, Signature attempted to argue that this guarantee they threatened to sue me over didn’t actually exist (for two investors), on the basis that director Lawrence Kenright’s signature hadn’t been witnessed.

Just another year in the life of an unregulated investment scheme.

Signature’s attempt to wriggle out of the guarantee failed because, as the judge ruled, both parties clearly intended for this guarantee to form part of the loan contract, therefore it didn’t matter that they forgot this formality.

As Signature didn’t attempt to argue that the guarantee wasn’t supposed to exist, its argument was one level above “it doesn’t count because we had our fingers crossed”.

Signature Living Hotel has previously survived two winding up petitions, which were dismissed in September 2019 and March 2020. With that in mind, I’m saving Signature’s full obituary for when more details of the administration emerge, so more details as and when they appear on the public record.

 

Emboldened LCF investors secure crowd funding for FSCS legal challenge

London Capital & Finance logo
~ Phoenix ~ 3 Comments

After being denied compensation from the Financial Services Compensation Scheme (other than a tiny handful of exceptions,) London Capital & Finance investors have raised money via crowdfunding to launch a judicial review.

As at 23rd April the campaign had already raised £7,833, exceeding its initial £7,000 target. Technically the campaign is to fund the judicial challenges of only the four LCF investors on the creditors’ committee, but if their challenges succeed, this will surely set a precedent for the rest.

London Capital & Finance investors have been both emboldened and enraged by the FSCS’ early indications that it will bail out investors in fellow collapsed minibond scheme Basset & Gold, which went into administration on 1 April.

20200424_090404.jpg

In the case of LCF, the FSCS has only bailed out a handful of richer and more financially experienced investors – those who transferred stocks and shares ISAs to LCF. To everyone else it has indicated it is unlikely compensation will be payable.

We have concluded there will be some customers who were given misleading advice by LCF and so have valid claims for compensation. However, we expect that many customers will not be eligible for compensation on this basis.- Jan 2020 FSCS announcement

By contrast, Basset and Gold investors have been given a far more positive indication by the FCA that compensation will be payable on the grounds of misselling.

The FSCS has determined that many investors have a good prospect of claiming compensation.– Apr 2020 FCA announcement

The distinction between LCF and Basset & Gold is that LCF had one FCA-regulated company, which both issued the investment and the investment literature, while Basset & Gold had two separate companies, one of which was not FCA-regulated and issued the minibonds, the other of which was FCA-regulated and issued the investment literature.

Which is of course entirely meaningless from the perspective of an ordinary retail investor. Nothing was stopping LCF from setting up two different companies instead of one, and keeping the misselling separate from the bonds themselves, except that they didn’t think of it (or care).

It is therefore not a surprise that the Basset & Gold collapse has given LCF investors fresh hope for compensation.

Commentary

My own money would be on the regulator and the Government as a whole eventually figuring out a Barlow Clowes / Equitable Life solution – i.e. compensation paid, not in line with arcane FSCS rules that even they don’t seem to understand, but on a one-off basis in recognition of regulatory failures which allowed LCF to run longer than necessary and lose more ordinary savers’ money than was necessary. This is what happened in recognition of regulatory failures over Barlow Clowes (in the 80s) and Equitable Life (in the 90s).

The litany of regulatory failures by the FCA is not seriously disputed. The FCA gave London Capital & Finance the “CAT standard” of FCA registration and ignored the systematic misselling of its investments for a further 3 years afterwards despite numerous attempts by outsiders to blow the whistle. As the FCA CEO in charge at the time has now been kicked upstairs to the Bank of England, the FCA is now free to issue regular mea culpas and lessons will be learneds.

Whether the FSCS or the Treasury pays compensation makes little difference as the general public pays either way; nearly everyone pays taxes and nearly everyone pays FSCS levies via use of financial services.

The main obstacle in the way of compensating LCF investors is moral hazard; the fear that if LCF investors are compensated, it will encourage others to invest in schemes paying unrealistically high returns for supposedly safe investments on the assumption that they’ll get their money back if it goes wrong.

The obvious counterpoint to the moral hazard argument is that the exact same argument applied to compensation for Barlow Clowes, the exact same argument applied to Equitable Life, and the exact same argument applies to Basset & Gold. In the first two cases the moral hazard argument was beaten by the argument that such a monumental failure of regulation and Government should result in compensation, and improvements to the regulatory system to ensure it doesn’t happen again.

There is a better way than whataboutery for LCF investors to counter the moral hazard argument; campaign not just for compensation but for the UK to bring the UK’s securities laws out of the 1920s and require all investment securities offered to the public to be regulated by the FCA, as is the case in the US.

If it becomes more difficult to open unregulated investment schemes and promote them to the public, this would counteract the moral hazard incentive to open and invest in them. It offers the taxpayer’s purse a quid pro quo – a one-off compensation payment (trivial in the grand scheme, especially now) in exchange for less economic damage in the future.

Or we could just do nothing and wait for the next wave of unregulated investment scandals, some of which, like Basset & Gold or investments recommended by dodgy FCA-regulated advisers, will inevitably fall onto the public purse. As my old ma always said, if you keep doing what you’ve always done, you’ll keep getting what you’ve always got.

FCA knew about misselling of Blackmore Bonds three years before collapse

Blackmore logo 2019
~ Phoenix ~ 17 Comments

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

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

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

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

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

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

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

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

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

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

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

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

So what did the FCA do?

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

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

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

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

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

Institutional contempt

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

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

This is not a rhetorical question.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Footnote – Philip Nunn speaks – or doesn’t

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

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

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

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

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

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

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

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

Whisky Cask Company in false “Oxford professor” CEO claim; Viderium investors to lose their money?

~ Phoenix ~ 3 Comments

A puff piece in the London Daily Post for Whisky Cask Company made the eye-catching claim that the CEO is an Oxford professor and that the investment scheme, which promoted itself as a “sure-fire” investment paying 8-12% per year, is endorsed by rugby legend Chris Robshaw.

The article claims WWC CEO Alexander Johnson is “Building Scotch Whisky Into A Competitive & Trending Investment Class”. On its publication it referred to him as a “whisky aficionado and Oxford professor”.

It claims whisky represents a “prudent” investment. The reality is that whisky is a high-risk investment like any commodity, especially when investing via a new start-up company.

The “London Daily Post” has no corporate presence beyond a mobile phone number and an address in a London residential street.

Its article on Whisky Cask Company is allegedly penned by London Daily Post writer Kevin Taylor. Taylor claims in his bio underneath the article to “cater an uncompromising form of journalistic standard for the audiences”. Despite his commitment to a form of journalistic standard, Taylor failed to spot that Alexander Johnson is not in reality an Oxford professor.

While Alexander Johnson is a visiting lecturer at Oxford’s Conted department – which caters to part-time and mature students – this is a long way short of being an Oxford professor, one of the highest positions in academia.

I contacted Oxford’s Conted department for clarification. They have not responded, but subsequent to the article’s publication – and my contacting Oxford’s Conted for comment – the London Daily Post article was corrected to say “Oxford lecturer”. Although in one spot it still refers to the company as “Whisy Cask company”.

Chris Robshaw was contacted but declined to comment on whether he endorsed the use of his name to promote Whisky Cask Company.

Viderium in minibond collapse?

Johnson is also the owner and chairman of cryptocurrency minibond scheme Viderium. Viderium raised £3.9 million from investors in its cryptocurrency bonds. Judging by a rather bizarre fragment on its website, it isn’t going well.

Reviews

This screenshot is from https://viderium.com/bond/reviews/. It is an “orphan” page, meaning it is not accessible by following links from Viderium’s home page, but can be accessed via Google or the URL. Viderium’s page on feefo.com itself has been closed, with all reviews deleted. It is a safe bet that the embedded fragment on Viderium’s own website is not supposed to be visible.

My best guess for the contradiction between the review’s title and content is that the reviewer edited his review after leaving it.

Viderium’s closure of its Feefo page and scrubbing of all reviews is quite an about turn from when it used to promote its Feefo ratings via press releases.

Investors have given their opinions of the bond on Feefo, a trusted independent review platform and Google partner. Impressively, Viderium’s bond has been rated 4.9/5 by existing investors, demonstrating the company’s commitment to those who’ve helped to make everything happen.

October 2018 Viderium press release

Viderium’s next accounts are due by September 2020.

Breaking: Blackmore Bonds collapses into administration

Blackmore logo 2019
~ Phoenix ~ 24 Comments

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

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

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

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

A year in the collapse of an unregulated investment scheme

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

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

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

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

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

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

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

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

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

Administrator Geoff Bouchier says

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

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

How do I get my money back from Blackmore?

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

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

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

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

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

Global Edge’s CEO stamps feet, threatens legal action

Global Edge logo
~ Phoenix ~ 5 Comments

At the turn of the year I reviewed Global Edge’s bonds paying 21% per year for investment in their betting algorithm.

Global Edge’s bonds claimed to offer “consistent profits regardless of Brexit” and were being promoted in the New Scientist’s newsletter (which is not exclusive to high net worth and sophisticated investors).

It transpires that The Growth Market was also employed to market the bonds. The Growth Market were investigated by the Mirror recently, after the collapse of an unrelated unregulated investment, which found that The Growth Market’s sales reps hid behind fake names while assuring investors that the collapsed investment was 100% safe.

My review noted that Global Edge’s bonds are inherently high risk and that their claim that “Expected compound growth rates in the range of 15% to 25% per month are realistic” is extremely dubious.

Global Edge director Iain Stamp
Global Edge CEO Iain Stamp

Global Edge is headed by serial entrepreneur Iain Stamp. Stamp emailed me on January 24 to complain of unspecified “inaccuracies”. I invited him to detail the inaccuracies, and then heard no more for two and half months.

Stamp then finally emailed me on April 2 with a list of his complaints.

I will not weary readers with most of them because a large section of Stamp’s complaint revolves around my mentioning the fate of Stamp’s previous businesses, Integrity and PPF Capital Source. (See “Who are Global Edge” in the original review.) Stamp’s email was accompanied by character references and letters from 2010 that frankly I couldn’t care less about. They have no bearing on the facts stated in my review – that Integrity was fined £350,000 and censured for misleading information by the Financial Services Authority (now the FCA).

Stamp has stated repeatedly that he was not personally investigated or criticised in his role as Integrity CEO by the FCA, and I have never asserted otherwise. Stamp appears to still harbour bitterness over Integrity’s collapse but that’s his problem and not mine. Stamp also claims that Integrity was not actually fined £350,000, which is simple reality-denial. Integrity’s fine was waived because it was already in liquidation, but a fine waived to protect creditors is still a fine, and the breaches which led to that fine are still breaches.

As for my reference to a Sunday Times article on the fate of Stamp’s business PPF Capital Source, Stamp says he is pursuing a defamation claim against the Sunday Times. We’ll see how that pans out, but for the moment the Sunday Times article remains up, so there is no reason I shouldn’t link to it. I took care to mention Stamp’s side of the story in the original review.

For more of Stamp’s side of the whole story , it’s on his personal website for those who are interested. Let’s move on to the present day.

Who exactly is Global Edge?

My original review noted that Global Edge did not disclose who was in ultimate control of the company. Filings with Companies House for the company behind Global Edge, UK Innovative TI Ltd, stated “The company has identified a registrable person in relation to the company but all the required particulars of that person have not been confirmed” and also that the shares were held by a “Galaxy Funding Foundation”, the details of which are also vague. That remains the case.

Stamp has provided some additional details as to who the ultimate owner is, but his email had “Strictly Private and Confidential” stamped all over it so I’ll refrain from disclosing them. Investors can do their own due diligence.

The Global Edge Bond

Stamp points out that the Global Edge investment literature is full of risk warnings. I have never said otherwise.

My review noted that Global Edge’s website, under a section headed “Investor Comforts”, claimed that an unnamed private equity investment had invested £3,000,000 into Global Edge while valuing the company at £20 million. (Remarkably low for a company holding an algorithm that returns somewhere between 21% per year and 1,355% per year depending on which figure you looked at.)

Stamp confirms that the mention of the private equity investor has now disappeared from Global Edge’s website. Whether their £3 million investment has also disappeared is not known.

Stamp takes issue with my comment “There is no betting algorithm that consistently and scalably generates returns of 21% per year after costs, let alone the 5-25% a month that Global Edge claim. If Global Edge had one they would be quietly turning their own £5 million into a billion-pound fortune, and not dilute their returns by soliciting investment from others”.

Stamp claims in response that many other algorithms generate significantly more than 21% per year.

In support of his claim Stamp cites a couple of people who made money from gambling and then bought football clubs.

Random people striking it lucky from betting and buying football clubs does not mean it is possible to consistently generate returns of 21% per year.

Millions of people all over the UK gamble and it is a statistical certainty that a handful of them will become millionaires.

I have not said that it is impossible for Global Edge to get lucky and make more than 21% per year from gambling. Anyone can make any return over any timescale from betting, if they’re prepared to risk total capital loss; it is possible to make a 100% return in thirty seconds from roulette. However, if I claim that I can consistently make 21% per year after all costs – let alone “realistic” “compound growth rates in the range of 15% to 25% per month” – now we enter the realms of the delusional.

In response to me pointing out that if Global Edge had a magic algorithm that could generate 21% per year, they’d keep it to themselves, Iain Stamp claims that their magic algorithm only works for up to £10 million, due to “liquidity constraints”.

Stamp failed to address the question raised in my review; if it only works up to £10 million, which they’d have in a mere four years if they only managed to generate 21% per year from the £5 million Global Edge claimed to make in beta testing (much much sooner if they generate compound growth of 15 – 25% per month), after which they’ll no longer be able to earn such great returns, why bring that day forward by soliciting external investment?

Fingers in ears

Despite taking two and a half months between his first and second email, Stamp seemed to think I should drop everything to reply, bombarding me with a series of petulant emails and legal threats after I failed to instantly send a reply to his long screed. Because it’s not like we all have anything else on our plate right now.

I replied to Stamp five days later, making many of the points in this article, by way of pointing out that he had not actually identified a single inaccuracy.

Stamp claimed not to have received my reply and continued to send legal threats. I forwarded my reply again, but he again claimed not to have received it. At that point I gave up.

To finish off, he sent me the threat “This is what happened to the last guy who defamed my character.” This was accompanied by a press release from 2010 (yes, we’re back to Integrity), about some guy called David Cottrell who apologised to Stamp for claiming, in an email circulated among a number of Independent Financial Advisers, that Stamp had defrauded clients who invested in Traded Endowment Policies devised by Integrity.

After Stamp took legal action, Cottrell had to read out a public apology in court in which he stated that he had no basis for his allegations, as part of a settlement. Whether Cottrell also had to hand over any money to Stamp in damages or legal costs is not known. Let’s be very clear: Integrity was fined £350,000 over the sale of its Traded Endowment Policies, and censured by the FSA, but Stamp did not commit fraud and won a victory in court against a private individual over that fact.

What this has to do with me I’ve absolutely no idea, as I haven’t accused Stamp of committing fraud.

If Global Edge fails to meet its ROI targets, runs out of money to pay interest on its bonds and collapses, as is an inherent risk, Stamp still won’t have committed fraud. Running a failed investment is not fraud.

Nor do I have any idea why Stamp thinks I’ve harmed his business.

Global Edge’s bonds are only suitable for sophisticated and high net worth investors. All the facts in my review over their inherent risks will already be known to such investors and their advisers. As will be the history of the directors’ previous businesses, as that is part of basic due diligence. Why Stamp thinks my review would be putting them off I haven’t the foggiest.

As ever, if there are any further developments in Stamp’s legal threats we’ll keep you posted…

We review Imperial Invesments – Ponzi scheme paying 350% per year?

~ Phoenix ~ 13 Comments

Imperial Investments, which is currently promoting itself via Facebook ads, claims to offer returns of 350% per year through trading shares.

Imperial Investment claims that investing in its scheme can help investors struggling with rent and other day-to-day bills.

Facebook2

Who are Imperial Investments?

Imperial Investments’ website says it has two founders – Dan Pugh and Scott Wood. Ownership of the company, Investments Imperial Limited, is however split 50/50 between Wood and a Malaysian national named Sze Yin Lie. Both Wood and Miss Lie list their nationality as Malaysian on Companies House. Despite being a co-founder, Pugh doesn’t appear to be a shareholder. The company was incorporated in August 2019.

Pugh for his part is a former British Army rifleman. [Edit 12.7.20: This article was amended on 12.7.20 to amend an error that Pugh claimed to be a Royal Marine. While Pugh’s LinkedIn profile states that he completed the Royal Marines’ All Arms Commando Course, this is a 13-week course open to all UK military branches.] Pugh is also the head of The Decision Group, which appears to be some sort of business consultancy… thing.

The word Business can be scary or even put you off the thought of wanting to try as when you sit down to start your business your draw a blank and have no idea where to start or you may be stuck  with an idea but do not know how to put it into play? Don’t fear just say to yourself ”Dear obstacle I will destroy you!”

Pugh also fronts videos for Imperial Investments, such as this one containing helpful hints on how to maximise productivity.

What’s the best time management? Let me tell you. One. Less fucking sleep. You don’t fucking need it. Half of you are going to be asleep while I’m making this video, you don’t fucking deserve it because you don’t work hard enough. Two, you need to eliminate wasted activity. What I mean by that, let me tell you, the missus comes to me and goes “Do you want to cook tonight?” Fuck. Sorry. Did somebody say “Just Eat”? Just Fucking Eat. Order it. Less time cooking, more time working.

Given that Pugh is credited as a “co-founder” despite not owning any shares in the company, shows more interest in video gaming than finance, and appears to be two sandwiches short of a picnic (although who needs fucking sandwiches? Fucking Deliveroo, to the fucking park. Sorted), there’s a strong whiff of Dan Pugh being a performing monkey while Scott Wood grinds the organ. If Wood even exists.

Wood’s LinkedIn bio claims that he is involved in “private wealth management and banking solutions” and is a “self made financial advisor” but gives no details as to his history before Imperial Investments. His profile image consists of a baby in a baseball cap.

How safe is the investment?

In its Facebook adverts Imperial Investments claims to offer a rate of return of 1.4% per day. Elsewhere this is clarified as 350% per year (the discrepancy is due to the rate not compounding and excluding non-trading days). They also claim “to profit whether the market goes up or down”.

The reality is that while anyone can make 1.4% in a day from trading on a good day, nobody consistently makes 1.4% day in day out. Trading shares is a zero sum game and the expected return is zero, minus costs.

That is a side issue however, as even if Imperial Investment’s magic 350% per year returns were real, they would still breaking the law.

Imperial Investments’ offer to take investors’ money and use it to trade shares amounts to a collective investment scheme. Running a collective investment scheme in the UK requires authorisation from the Financial Conduct Authority. As does issuing financial promotions, including its Facebook ads. Imperial Investments is not regulated by the FCA, so by running a collective scheme and issuing financial promotions, they are committing a criminal offence.

If Imperial Investments actually had a magic way to make 350% per year, they would keep it to themselves, and would have no need to break the law or dilute their own returns by soliciting investment over Facebook.

The reason why Imperial Investments hasn’t registered with the FCA and opened a collective fund the legal way, is that in doing so they would have to reveal that their magic formula that produces 350% returns doesn’t exist.

As Imperial Investments has no magic formula producing 350% returns, any returns to investors will either be illusory (“numbers on a screen”) or, if real money is paid into an investor’s account, this will be funded by the investors’ own money or that of others, making Imperial Investments a Ponzi scheme.

Should I invest with Imperial Investments?

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.

Any investment offering a ROI of 350% is in reality a virtually guaranteed loser for all but those running it. The mathematics of Ponzi schemes guarantees that the vast majority, if not all, of investors will lose their money.

This still applies if the Ponzi scheme is fronted by a Call of Duty fan who never sleeps because sleep is for people who don’t deserve it, or something.

Do not invest unless you are prepared for total losses.

FCA action?

A 13 January 2020 Facebook post states in full:

Any queries anyone might have please feel free to contact and use our case number thank you.
Case 206402556
020 7066 1000
[email protected]

Needless to say it’s unusual for a Ponzi scheme to invite people to contact the FCA. I’ve asked the FCA what this is about (I don’t contact Ponzi schemes for comment for obvious reasons) but don’t expect them to shed much light on it.

In the meantime, the salient facts remain that Imperial Investments is not on the FCA register and is issuing financial promotions in the UK, which is a criminal offence.

Were Basset & Gold bonds risk-free after all?

Basset and Gold logo
~ Phoenix ~ 4 Comments

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

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

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

Facebook
From Basset & Gold’s Facebook page in March 2018, since deleted. [sic]
The FSCS confirmed on 1 April that investors can make a claim for misselling if they were sold their bonds via Basset & Gold’s FCA-regulated company.

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

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

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

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

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

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

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

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

That said, we’ve been here before.

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

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

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

How did we even get here?

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

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

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

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

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

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

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

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

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

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

Only the FCA taking prompt action to stop the misselling.

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

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

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

More public subsidy for West Ham

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

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

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

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

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

Privilege Wealth administrators file final report, total losses for investors

~ Phoenix ~ Leave a comment

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

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

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

The administrators were pursuing recoveries from

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

Evidently these have come to nothing.

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

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

Mini-minibond scheme also finally folds

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

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

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

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