Liquidator Asher Miller of David Rubin & Partners has written a report to creditors saying Colarb’s balance sheet cites assets of £39.7 million, of which Prince had said £27.7 million could be realised. However, the report says Prince’s figure appeared to be “overstated by £20 million or more” based on earlier documents signed by Prince and MJS’s two biggest portfolio companies.
The biggest alleged overstatement was in the case of money invested with a Dubai firm called Angel World, where the £26 million valuation on the Colarb balance sheet was written as being worth only £5.3 million.
“MJS simply had cashflow issues… and should still be operating today” says former MJS Capital CEO Shaun Prince
CEO Shaun Prince blames the discrepancy on MJS Capital being put into liquidation, as a result of being unable to pay its debts to bondholders.
What the liquidation has to do with the discrepancy is unclear. Any administrator would have been free to let MJS Capital’s investments run their course if there was a realistic chance of getting a 400% return as a result.Prince has previously told the Evening Standard that MJS Capital took in c. £30 million from investors.
The administrators’ report is not yet on Companies House but we’ll bring you more when we have sight of it.
Smith & Williamson, the administrators of £230m FCA-authorised Ponzi scheme London Capital & Finance, have released their first six-monthly update to investors.
The administrators are currently envisaging a return of “as low as 25%” to investors. This is predominantly based on expected recoveries from Independent Oil & Gas. All other LCF assets remain of extremely uncertain value.
This is actually an improvement on S&W’s initial forecast of 20% as a “best case” figure. But that is little cause for celebration, given that the LCF asset with the best hope of delivering returns for investors – the “jewel in the crown“, in S&W’s characteristically optimistic language – is its complex interests in Independent Oil and Gas.
An AIM listed oil exploration company may well have a better prospect of a return than, say, loans to failing resorts on Cape Verde, but that’s still a lot of chance involved.
As for those other investments:
LCF lent a total of £12 million to two companies investing in Cape Verde resorts, but the companies never took any legal title to land, and the recoverability of the loan is doubtful.
A total of £70 million was lent to the “Prime” companies investing in resorts in Cornwall and the Dominican Republic. The administrators’ efforts to establish whether these are worth anything have met with frustration.
We are very concerned that the management of Waterside, which is well aware that the Bondholders are depending on the LCF borrowers and sub-borrowers for their repayment, has made no efforts to engage with the administration to prove to the administrators either the value of the Waterside business or of the value of the security provided to secure the repayment of the debt. The administrators will be continuing to increase the pressure on Waterside’s management in this regard.
In regards to the proposed refinancing of the Prime group, as advised to us in February 2019 by the directors of Prime Resorts Developments Ltd, to our knowledge, there has yet to be any deal done and to date we have had no substantial response to our enquiries to give us any assurance as regards progress towards any refinancing or any useful update from Prime Resorts Developments Ltd with regard tothe general financial position of the company. […]
It is very surprising to the joint administrators that the Prime group is so extraordinarily reluctant to engage and consider this to be either suspicious or naive.
And the hunt for LCF’s missing gee gees hasn’t gone much better.
Since our last report to creditors, we have continued our investigations in order to progress realisation of LCF’s assets for the benefit of creditors and Bondholders. In particular, we have requested that Mr Cubitt (the sole director and shareholder of FS Equestrian Services) attend for interview to assist us with our enquiries. We have also requested an up to date list of all FSE’s assets including the stock of horses (which were provided as security by FSE in respect of its borrowing from LCF), the names of such horses, their location and current value. In addition, we have requested details in relation to the sale of any horses and details of the use put to the proceeds of such sales. To date, Mr Cubitt has not attended voluntarily for interview.
As for £16.6 million invested in London Power & Technology, this seems to have disappeared.
We previously reported that this lending of £16.6m appeared to be in respectof a redemption of preference shares in London Power Corporation. Our investigations to date suggest that this transaction did not take place and furthermore, there does not appear to be any transaction to support lending of £16.6m.
So all eyes are still on Independent Oil and Gas, to which LCF lent a total of £38.6 million via its London Oil and Gas subsidiary.
IOG has agreed to farm out some of its Southern North Sea gas fields to CalEnergy Resources Limited. Should the deal go through, which is expected in September, IOG will get the cash to repay LCF’s non-convertible debt of £16.6 million, plus accrued interest.
LCF / LOG’s existing convertible loans will be renegotiated into unsecured loans convertible into shares at 8p and 19p, which the administrators will sell when they (and expert advisers) think the time is right.
At time of writing IOG currently trades at 18p. For conversion rights to be worth anything, the shares have to trade above the conversion price (otherwise you get more money from having the debt paid back). This suggests that S&W are still banking on IOG’s shares going up, and eventually getting back more than the £40 million that RockRose Energy offered for the debt back in March (which would have recovered the initial amount lent by LCF to IOG, plus change).
Another £5.4 million loaned to Atlantic Petroleum is said to have “high” prospects for being repaid.
Escrow payments
The Four Horsemen of LCF (clockwise from top right): Simon Hume-Kendall, Andy Thomson, Spencer Joseph and Elten Barker
Readers may remember that the Four Horseman of LCF, CEO Andy Thomson, Simon Hume-Kendall, Spencer Golding and Elten Barker, all of whom benefited from multi million pound sums arising from the Waterside and Dominican Republic investments going into their “personal possession or control”, were asked by S&W to repay those sums into escrow, to be repaid if LCF investors were repaid in full.
At the time of that report, S&W stated that Thomson and Hume-Kendall had agreed to this arrangement, while Golding and Barker had yet to reply.
None of the Four have paid up.
Thomson has claimed, from his sickbed and through his lawyers, that he never said any such thing.
Mr Thompson, through his lawyers, and notwithstanding his illness, has disputed he ever made such an offer.
(Note: S&W use both spellings of Thomson’s surname throughout the report; I have stuck with the one on Companies House.)
Hume-Kendall “continues to engage with the administrators albeit little progress has been achieved in their dealings with him.”
Golding and Barker, through their lawyers, have told S&W to swivel.
Spencer Golding and Elten Barker have indicated through their lawyers that the Bondholders should be fully repaid through repayments to LCF from its borrowers. Accordingly, the administrators do not anticipate that Mr Golding or Mr Barker will agree with the proposal to put funds into escrow.
The entire point of the escrow proposal is that if bondholders are fully repaid, the escrow funds will not be drawn on, and the Four Horsemen will get their money back. This appears to have fallen on deaf ears.
Given that S&W are forecasting recoveries of 25%, Golding and Barker are probably the only people in the country who think that LCF will fully repay bondholders.
In March S&W was reported to have written to Surge to ask them to repay the profit (not their entire 25% commission) it made from selling London Capital & Finance bonds.
No mention of this or Surge’s response is made in the latest update.
Fees to date
S&W have so far incurred a total of £2.3 million in fees. A further £2.9 million has been incurred by professional advisers to the administration, of which lawyers Mischon de Reya account for the lion’s share of £2.5 million. £215k of other costs have not yet been approved.
Most of these fees remain outstanding, and the creditors’ committee has not yet approved S&W’s fees.
Only £3.6 million has so far been realised by the administration, mostly cash that LCF still had in the bank when it collapsed. This should in theory change quite shortly if the Independent Oil and Gas deal concludes as hoped.
5% dividends put on hold
At the creditors’ meeting in April, Smith & Williamson indicated to investors that they could be paid dividends in 5% increments, with the first dividend potentially arriving in the summer, if sufficient funds were realised.
At the Creditors’ Meeting held on 24 April 2019, it was stated that dividends would be paid to Bondholders in 5% increments, once sufficient net funds were realised. It was envisaged that it may be possible to pay the first dividend at the end of the summer, dependent on the outcome of the IOG investment.
This turned out to be another bout of S&W’s optimismitis.
Whilst it is anticipated that the IOG deal will complete in September, this first dividend is now very likely to occur later than originally hoped, because of the potential strategy as regards realising the administrators’ interest in IOG in an orderly fashion as advised by our specialist oil and gas advisers.
As Smith & Williamson needs to have covered its own fees, plus the fees of Mishcon de Reya and its other advisers, plus the future costs of any further attempts to pursue recovery from individuals or LCF’s assets, before it issues any dividends, investors should probably not hold their breath.
As is standard as part of administrators’ duties, S&W have submitted a report to the Secretary of State for Business, Energy and Industrial Strategy (that would be Andrea “having kids makes you a better Prime Minister” Leadsom, at least at time of writing) into the conduct of LCF’s directors.
As is equally standard, S&W remain tight-lipped over what was in it.
S&W states that there is a “concerted and very likely co-ordinated” exercise aimed at frustrating the administration process.
It is unfortunate that the administrators are being required to deal with a concerted and very likely co-ordinated exercise on the part of a number of individuals aimed at frustrating the joint administrators’ enquiries, for their own reasons. This approach causes delay and additional expense to the joint administrators’ objectives, to the prejudice of Bondholders and so is most unwelcome.
Who these individuals are is not made clear by S&W.
William John (HV) Limited are offering an unregulated bond paying 20% gross over the 1 year term.
William John has previously issued bonds on the Irish Stock Exchange (via Audacia Capital plc) paying 7.5% to December 2022.
I asked William John to confirm that the 20% bonds were genuine and at time of writing (72 working hours later) have not yet received a response, so investors will have to verify for themselves that the 20% bonds are genuinely issued by William John and not a clone scam. The review below is mainly based on literature sent to a member of the public for the 20% bonds.
Update 22 May 2020: William John has contacted me to confirm that the 20% bond was genuine. They have also asked me to make clear that they are no longer offering 20% per year for new investments. [Update ends]
Investors funds are to be used to trade forex. The company claims to offer a “low risk, high performance investment strategy”.
Who are William John?
Trevor Inch, William John director and 95% owner
In its brochure, the founders of the company are named as Robert Holgate and Trevor Inch. Filings for William John Holdings Limited show that Holgate has now left the business (resigning as director in September 2018, although he continues to own a 5% share).
The current directors are Trevor Inch and Christopher Sephton. Trevor Inch owns the other 95% of the holding company.
Sephton was previously a director of Victory House Group Limited. Victory House Group is a subsidiary of Christianson Property Capital, which offered unregulated bonds paying 10% for a 10-year term, reviewed here in February 2018. Sephton resigned as director of Victory House Group in June 2017.
A balance sheet filed by William John (HV) Limited in June 2019 (when it converted to a plc) shows it had £91,672 in net assets as at May 2019. The company was incorporated in January 2019 and has yet to file full accounts.
Update 22 May 2020: This review previously drew on a filing from Audacia Capital plc relating to two other William John companies, William John (LV) Limited and William John (CC) Limited. William John has asked me to make clear that William John HV had no trading connection with Audacia Capital, meaning that funds raised from this particular HV bond were not, as this review previously stated, on-lent to William John CC Limited. I am happy to set the record straight. [Update ends]
How safe is the investment?
William John claims to have “access to a highly successful algorithmic foreign exchange trading program which has a proven track record over a number of years” (proven for whom is not specified; William John (HV) was not incorporated until January 2019) and offer a “low risk, high performance investment strategy”.
The reality is that if William John is unable to make sufficient returns from its forex trading to cover its costs and investor interest of 20% in one year, investors risk losing up to 100% of their money.
The use of the words “secure” and “low risk” to describe the investment are highly misleading. If William John’s investment was in any way “secure” or “low risk”, they would not have to offer 20% in a year to attract investors.
Asset backed investment
William John claims that its bonds are “fully asset backed” and that in the event of a default, investors would have first claim on its assets.
What assets would have in the event William John defaulted is not clear. As its objective is to trade forex, the main asset it will hold is whatever currency it has at any one time. If it later defaults on its debts then that would normally mean it has run out of currency.
William John states in its brochure that it has “undertaken a board resolution to maintain positive net assets at all times to ensure that the amount of Bonds issued will be covered by the net asset position of the Company”.
The fact that William John has decided at a meeting to maintain positive assets does not mean it will succeed. If, for example, its forex trading does not perform as expected and due to poor forex trades it ends up with less than it needs to repay investors 20% per year on top of any other costs it has, then its minutes are not going to change that.
William John goes on to say “…in this case assets minus liabilities must always be a positive ?gure and in most cases it is illegal to operate a company in the UK with a negative net asset position.” This is nonsense. It is not in any sense illegal to operate a company with negative net assets.
What is illegal is trading while insolvent (running up further debts when you know you can’t pay your existing ones), however a company with negative net assets is not necessarily insolvent. It is perfectly legal to carry on trading if there is a reasonable expectation it can turn the company around before its liabilities fall due.
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 William John, 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 William John) to confirm that in the event of a default, the assets of William John would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what William John tells them about their assets.
The prospective investor’s professional corporate finance team could probably explain the difference between technical insolvency and actual insolvency while they’re at it.
Should I invest in William John?
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 offering returns of up to 20% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, William John’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?
If investors are willing to risk 100% of their money for a 20% return if William John’s algorithm is as good as they say, that is their choice. But the use of terms like “secure” and “low risk” by William John and their introducers should be considered a serious red flag.
If you are looking for a “low risk” investment, you should not invest in corporate loans with a risk of 100% loss.
HAB (Happiness, Architecture, Beauty), a company co-founded by Grand Designs presenter Kevin McCloud, has told its investors to expect up to 97% losses.
HAB raised a total of £4.3 million from the public in equity shares and unregulated mini-bonds in 2013 and January 2017. A further fundraising in September 2017 aimed to raise up to £50 million; how much this added is unclear.
But it now emerges that small investors who put £2.4m into one of the bonds are on course to lose between 74% and 97% of their money in a worst-case scenario.
Another set of investors, who sank £1.9m in one of the HAB companies in 2013 and were told to expect dividends of at least 5% by the end of 2016, say they have not received a penny and have been “fobbed off”.
Grand Design’s and HAB Land’s Kevin McCloud
McCloud’s HAB Land is the latest of a number of celebrity-endorsed unregulated investment schemes to default on investors. Notable others include Store First, which was endorsed by former Top Gear presenter Quentin Willson.
Then there was Carlauren, which employed Homes Under The Hammer’s Martin Roberts as an “advisor to the board and contributor to sales & marketing content”. Roberts’ involvement was promoted in Carlauren marketing material.
Quentin Willson has stated that he was among the investors who lost money in Store First.
Carlauren and Homes under the Hammer’s Martin Roberts, as pictured in investment literature
Roberts did not respond to a request for comment. For safety’s sake we can assume he had no involvement in its day-to-day running or its failure to pay investors as promised.
Moving away from the world of TV celebrity into politics, there was MJS Capital, some of whose investors told the Evening Standard that they invested on the assumption that if it was backed by a member of the House of Lords it had to be legit.
HAB Land is slightly different because the celebrity in this case did not just endorse the investment but co-founded it.
There is nothing wrong with celebrities investing in or working for an unregulated investment scheme. But when their involvement is specifically promoted in their marketing material, there is inherently a danger that investors may think “So-And-So wouldn’t back an investment scheme that wasn’t safe”.
This is of course not an assumption that any sophisticated or professional investor would make, but if the endorsement of the celebrity has no effect on investors’ decisions, it is difficult to see why unregulated investment schemes should promote their involvement in their investment literature or go the expense of hiring celebrities in the first place.
It may be too much to ask that celebrities exercise some due diligence when promoting inherently high-risk investment schemes with a risk of 100% loss, considering the people who are at risk of being taken in by “if a celebrity recommends it it must be a good investment”.
So in the meantime, the rule has to be: if you see an investment being promoted by a celebrity, walk away.
Update 1.10.19: This review was written when FLF Litigation Services was known as Fortress Legal Finance. The company changed its name (again) in September 2019. The original review follows.
Fortress Legal Finance offers unregulated bonds paying 7.12% per year for a 3 year term and 11.5% per year for a 5 year term.
Funds raised are used to invest in litigation funding.
Investors in Allansons (an unrelated litigation funding scheme that collapsed earlier this year) have reported being cold-called with an offer to invest in Fortress paying 12% “guaranteed” over a 6 month period.
Who are Fortress Legal Finance?
Andrew Lynch, Fortress Legal Finance director and owner
Fortress Legal Finance was incorporated in 2015 as Robert Dodd Watches Limited. According to its last filed accounts, it was dormant as at 31 December 2017. In November 2017 it was renamed Litigate Aid Limited, and then a month later to Fortress Legal Finance. In February 2018 Andrew Lynch took over as sole director and controlling owner.
Fortress is yet to file accounts as an actively trading company.
Fortress Legal Finance is currently owned 70% by Andrew Lynch and 30% by Berriblue Limited. Berriblue is owned 55% by Andrew Lynch and 45% by Tracey Lynch.
Fortress Legal Finance’s promotions are signed off by First Financial Advisers Limited. Fortress Legal Finance’s Twitter feed states that it obtained Section 21 approval – allowing its bonds to be promoted – in December 2018.
How safe is the investment?
Fortress Legal Finance is promoted by unregulated introducer Michael Beyer as offering “an investment that is unaffected by market conditions, recession or BREXIT.” and “ability to reduce overall portfolio risk”.
The reality is that these are loans to a small start-up company and carry an inherent risk of 100% loss. For the vast majority of investors holding either cash or regulated investments, investing any amount in unregulated bonds certainly does not reduce overall portfolio risk.
Fortress Legal Finance represents that it will have After The Event insurance in place, which covers it in the event that the cases it funds are unsuccessful.
This does not mean that the investment is risk-free. A document on Fortress’ website states that After The Event insurance typically covers 30 – 40% of the total amount spent on a case.
For the investment to succeed, it is not enough for Fortress just to get its money back (let alone 30-40% of it); Fortress needs to be able to consistently generate up to 11.5% from successful cases after all costs (including the costs of any commissions paid to unregulated introducers such as Michael Beyer to source investment).
Should it fail to do so – an inherent risk with lending money to any small startup – investors risk losing up to 100% of their investment.
Should I invest in Fortress Legal 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 micro-cap company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
Any investment offering returns of up to 11.5% per year is inherently very high risk. As an individual, illiquid security with a risk of total and permanent loss, Fortress Legal Finance’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?
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 is sufficient for the risks involved in lending to a small company.
If you are looking for a “guaranteed” investment, you should not invest in corporate loans with a risk of 100% loss.
102 creditors of Hudspiths have succeeded in having the company’s voluntary liquidation converted to a compulsory one, in a bid to gain more insight into what the collapsed unregulated scheme did with their money.
Hudspiths investors were unhappy with the voluntary liquidation and believe that a compulsory liquidation will give them more power to find out where the £50 million they invested went.
They took the company to the High Court which ruled in their favour on 7 August.
The Official Receiver will now take over the liquidation.
A barrister for Hudspiths investors accused Hudspiths of running a Ponzi scheme. Hudspiths director, Fifty Shades of Grey fan Karl Lubienicki, has denied the allegation.
More to follow as and when the new liquidators report.
An undercover investigation by The Times into Action Fraud has revealed
most reports are never followed up on
managers mocked fraud victims as “morons”, “screwballs” and “psychos”
victims were misled into thinking that they were talking to a police officer rather than an outsourced call centre worker, and led to believe their case will be investigated when most reports are never followed up on
About half of all reports to Action Fraud are filed as “information reports” as opposed to “crime reports”, and are unlikely to ever be looked at again. The decision is usually made during the call, but victims are, naturally, not told if their report is to be ignored.
As little as 2% of reports result in a conviction.
Four Action Fraud staff members have been suspended.
It seems a safe bet that those thrown under the bus by Action Fraud will have been those indulging in offensive but frankly innocuous behaviour like playfighting during calls, or tweeting about being hungover at work.
Those who created the system whereby most fraud reports in the UK are filed in the circular filing tray under the desk are much higher up the ladder and immune.
For months I have followed up any reference to contacting Action Fraud with words to the effect of “Your report will be placed on a file and if enough reports are received, a police force may take action. Do not expect to hear anything further beyond a standard acknowledgment” depending on how long the paragraph has already run on for.
Contacting Action Fraud is not a waste of time, but only because victims of fraud usually need to feel that they have done something to achieve closure, and contacting Action Fraud is usually all that can be done.
Rather than launching an investigation and throwing a few more phone monkeys into the dole queue, it would be refreshing if the UK’s police force would instead hold their hands up and admit what many readers will already know: the police do not give a shit, and have never given a shit, if people fall victim to fraud.
The idea that they do is dangerous, because one of the most popular phrases in a scammer’s playbook is “if this was a scam, the police would have shut us down”.
Unfortunately the police have a tendency to indulge the public’s Dixon of Dock Green fantasy that if you tell the police about a crime, a bobby will immediately spring into action. It suits them to indulge this fantasy for PR purposes and political leverage.
So, ironically enough, it is likely that an investigation will be conducted, Action Fraud will promise that lessons have been learned, and then carry on as before.
If any boiler rooms need some extra employees, I hear there will shortly be a few people on the job market who are experienced in reading off scripts, pretending to be someone they’re not and telling fraud victims that up is down.
Asset Life plc, which raised £8 million from investors in its bonds, has gone into administration, according to reports. Confirmation of the administration was filed with Companies House on Wednesday.
David Rubin & Partners have been appointed as administrators, who are also currently investigating MJS Capital (aka Colarb).
Asset Life plc claimed to have an insurance policy in place which provided “Security of the Capital”. Exactly what this insurance covers is yet to be made clear, but no investment offering 8.75% per year to the public is fully insured against the risk of loss, and investors would be wise to manage their expectations.
Media spotlight fell on Asset Life plc after the collapse of London Capital & Finance, due to a connection between its directors.
Asset Life plc’s Chairman, Martin Binks, was a director of collapsed minibond firm London Capital & Finance from October 2015 to August 2016.
Since May 2014 Martin Binks has been a director of another former minibond firm, Anglo Wealth Limited. In December 2018 Anglo Wealth Limited was described as an “elegantly packaged scam” by a Southwark Crown Court judge, who sentenced two other Anglo Wealth directors, Terrence Mitchell and Andrew Meikle to suspended prison sentences and disqualification as directors.
Binks has not been accused of any wrongdoing in relation to his ongoing role at Anglo Wealth.
Despite the fact that the bulk of the Anglo Wealth funds were “dissipated on supporting the defendants’ lifestyles”, according to lawyers advising the CPS, Anglo Wealth investors were repaid in full.
With the collapse of Asset Life plc, the question of where the money to repay them came from is more urgent than ever.
A few months after launching its IFISA investments and misleadingly named “cash investments”, reviewed here in April, Grounds has abruptly shut down and announced it is returning investors’ original capital.
Grounds was closely linked to the Dolphin Trust property scheme (now renamed German Property Group) through common personnel.
Grounds raised investment via Nicola “Superwoman” Horlick’s Money & Co platform. The Grounds website now instructs investors to contact Money & Co.
Dolphin / GPG previously raised funds via Money & Co’s P2P platform under the name “Project Seascape”.
As you know, there have been a number of negative events surrounding property investment in the UK (Lendy, LCF and then the You and Yours item on Dolphin), so they did not think this was the time to raise money through an ISA offering.
Withdrawing from the market and returning already-raised funds seems an extreme reaction to the collapse of an unrelated Ponzi scheme and scandal-hit P2P platform, but it’s their business.
Dolphin investors continue to complain of overdue payments.
Another Dolphin-related company, Vordere plc, which is listed on the AIM market of the London Stock Exchange, has temporarily suspended its shares since 5 July, pending the acquisition of six German properties for €59,290,000.
In 2017 Vordere acquired a number of German properties from Dolphin Trust companies in exchange for shares in Vordere, which constituted a “reverse takeover”.
It seems a safe bet that the six new German properties to be acquired by Vordere will again be coming from Dolphin Trust.
This is of course assuming that Vordere can raise the necessary funds to buy them; its net assets were £24.2m in March 2019 so it will presumably need to raise funds to complete the acquisition.
Whiskey Wealth Club offers investment in barrels of Irish whiskey, the premise being that the barrels will increase in value as they age.
Its website claims that
Investor returns are currently in the 10-20% per annum region.
and that
Investing in barrels of whiskey as they age and increase in value in bonded warehouses offers potentially massive rewards with relatively little risk.
Its brochure goes further, claiming various eye-popping potential rates of return, including a claim that whiskey offers “15 YEARS TO TURN €2,550 INTO €160,000” – a 32% per year rate of return.
Who are Whiskey Wealth Club?
Directors and joint owners Scott Sciberras and William Fielding
Whiskey and Wealth Club was incorporated in November 2018.
A confirmation statement filed with Companies House claims that no-one exercises significant control over the company. This appears to be contradicted by the incorporation document, which states that co-founder and CEO Scott Sciberras, co-founder and COO William Fielding, and Bradley Jay own the company in 34/33/33 shares.
I couldn’t leave WWC’s “About Us” page without noting that one of their Senior Wealth Managers rejoices in the name of Becci Toogood.
When she’s promoting whiskey investments projecting returns of 32% per year, Becci’s clients must be hoping that Ms Toogood actually is to be true…
How safe is the investment?
Whiskey Wealth Club claims that investing in whiskey carries “relatively little risk”.
The reality is that you are investing in a commodity supplied by a company that is less than a year old at time of writing, which is inherently high risk.
Thereality is also that no investment projecting returns of 10-20% per year or 32% per year to the public carries “relatively little risk”.
Whiskey is a commodity and the price of all commodities fluctuates considerably.
In its brochure, WWC does acknowledge this fact – only to sarcastically dismiss it. In a miniscule disclaimer it states:
Like anything in life, nothing is guaranteed. America (Irelands biggest export market) could change laws and reinstate Prohibition again. Other countries could follow suit which would cause an oversupply of the market and bring whiskey pricing down. It’s unlikely but could happen.
There are plenty of reasons why a whiskey cask could be worth less than the buyer paid for it that do not involve America reinstating Prohibition.
Whiskey and Wealth’s economic illiteracy manages to get even worse from there.
In an email promotion sent to investors, it states:
Whiskey increasing in value over time is inevitable as it’s based purely on its age. It doesn’t suffer the ups and downs of financial markets. How much it increases depends on supply and demand.
Securities on financial markets go up and down because of supply and demand – and so does whiskey.
Whiskey will not increase in value over time if supply goes up, or demand goes down. Or if the investor paid too much in the first place.
Whiskey Wealth Club’s claim that demand for Irish whiskey currently exceeds supply may well be true. Its claim that the gap will widen even more over the next few decades is conjecture. Its claim that its conjecture is inevitable is nonsense.
The worst case scenario is that investors hand money to Whiskey Wealth Club and they are unable to fulfil their contract to supply the whiskey – which not a criticism of WWC, but an inherent risk when dealing with any small company. In this case investors would be looking at up to 100% loss.
Due diligence
The second rule of investment is “don’t invest in what you don’t understand”. (The first is “don’t lose money”.)
Unless investors are already professionally experienced whiskey dealers, they should employ a professional whiskey valuer working for and paid by them (not by Whiskey Wealth Club) to confirm that WWC’s whiskey casks are as valuable as they say they are.
You would not buy a house as an investment and simply assume the seller’s estate agent’s valuation was accurate – you would hire your own valuer. The same applies here, unless you are willing to take a total gamble.
Verifying that Whiskey Wealth Club are able to supply whiskey as promised also requires professional due diligence into the firm. Note that speaking to Whiskey Wealth Club representatives or visiting their premises is not due diligence. Due diligence means independent verification of their claims.
The simple question investors need to answer is: if WWC’s whiskey casks will increase in value by 10-30% per year with so little risk, why does WWC need to sell them so cheaply?
Regulation
Whiskey Wealth Club inaccurately describes its investment as “relatively little risk” and misleadingly compares investment in a commodity with a small newly-formed company with saving in an FSCS-protected deposit account.
In the world of regulated investments, misleading promotions like this would be subject to intervention by the FCA. Investors in whiskey, however, are considered to be buying booze – even when it is explicitly promoted as an investment – and consequently the adverts do not fall within the oversight of the FCA.
While this leaves Whiskey Wealth Club’s adverts subject to regulation by the Advertising Standard Authority, the ASA is a national joke, with virtually no power.
Investors will therefore need to make doubly sure they are able to assess Whiskey Wealth Company’s claims for themselves.
Should I invest in Whiskey Wealth Club?
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 commodity investment, 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 10-20% per year or 32% per year is inherently extremely high risk. As an investment in a commodity supplied by a small newly-formed company with a risk of total and permanent loss, Whiskey Wealth Club is much higher risk than a mainstream diversified stockmarket fund.
Before investing investors should ask themselves:
How would I feel if Whiskey Wealth Club defaulted on the contract 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 an investment with “relatively little risk”, you should not invest in a commodity supplied by a small company with a risk of 100% loss.
And the hunt for LCF’s missing gee gees hasn’t gone much better.
