Krono Partners update: nothing to update

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The administrators of Krono Partners, Smith & Williamson, have filed their latest six-monthly update.

The preceding twelve months brought the revelation that a significant Krono player, Ulrik Debo, had been charged with securities fraud in the USA.

Criminal proceedings by the Securities and Exchange Commission are ongoing.

There is however no update on returns from the “Company Y” loan platform, on which the administrators are pinning their hopes of recoveries.

The director has indicated that any return from this asset is currently remote.

Nor is there any update on the ragbag of other assets held by Krono.

There are no further developments to report on the following assets: Unlisted shares; Other debtors; Bank accounts; Krono Administration Limited; Listed shares; Micro loans; Intellectual property

A breakdown of timecosts shows that in the last six months, a total of 18 human-hours has been spent by Smith and Williamson on the Krono administration, of which the largest item, taking 8 hours, was compiling the six-monthly report.

Fielding investor enquiries accounted for another 3. Compliance and “general review” took up the bulk of the remaining 7.

This backs up the impression that the administrator’s plan is to grab a deckchair and a) wait for the outcome of the US case against Debo (although how it directly affects Krono Partners is as yet unclear, as Krono was not mentioned in the SEC case) and b) continue waiting for “Company Y” to generate some returns.

Krono Partners update: management team member charged with securities fraud

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

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

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

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

Debo is also a director of Company Y.

The U.S. Securities and Exchange Commission alleges:

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

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

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

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

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

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

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

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

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

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

Krono Partners administrators file update: still no dividends from Company X

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The administrators of Krono Partners have filed their latest update, a month after the first anniversary of Krono’s administration.

Krono Partners launched in 2013 and offered unregulated seven-year bonds paying interest of 8% per year, supposedly from investing in distressed real estate in the United States and Europe. It then offered another series of bonds which would supposedly be used to invest in SME bridging loans.

The company went into administration in March 2018, supposedly as a result of bank accounts operated by Jade State Wealth being frozen.

This, it has since become clear, was only the tip of Krono’s problems. Krono holds neither distressed real estate nor bridging loans. Instead over three quarters of its assets (according to the Statement of Affairs) consist of an investment registered in the Cayman Islands known as “Company X” which raises corporate finance via Exchange Traded Notes.

Throughout the period of administration, none of Krono’s investments have paid any returns which could have been used to pay investors’ returns of 8-10% per year, even if it hadn’t gone into administration.

Company X is now Company Y

Hopes of investors getting any of their money back rest largely on Company X paying commission from its fundraising to Krono, in return for the money Krono invested in it. When Smith & Williamson were appointed as administrators, Krono management claimed that investors could expect repayment in full.

The administrators have now revealed that Company X can’t actually pay any commission to Krono because of regulations in the Cayman Islands. Whoops.

Thankfully, a way around this has been found which involves a new Company Y being set up in Hong Kong, and has seemingly replaced Company X.

No commissions have yet been received from Company Y either. The administrators list five “key projects” being undertaken by Company Y which are at various stages of fundraising; none have yet reached the stage where they pay Krono (and in due course their investors) any money.

Other than cash in the bank, Krono’s other assets consist of relatively small amounts in shares and micro loans, which are also yet to return anything. A “Company B” in which Krono owns 4 million shares is due to list on the Canadian Stock Exchange by 31 December 2019.

The biggest payment the administrators have received so far is in question. £85,000 was received under “other debtors” which were “relating to the sale of an equity interest”. Subsequently the administrators were paid another £16,649. The unnamed payer is now claiming that only the £16,649 was due and the £85,000 should not have been paid.

The £85,000 / £101,000 is by far the biggest realisation made to date (the only other being £42k in a trading account and cash in the bank) so it will be a blow if it turns out that most of it has to be handed back. Total receipts in the administration to date currently stand at £143k, while the administrators’ costs so far stand at £154k.

The Financial Conduct Authority reviewed Krono Partners in 2014, shortly after launch. After four months it closed its case and took no further action.

Krono is one of a number of failed unregulated investments currently in administration with Smith & Williamson, alongside London Capital & Finance and Park First.

Krono Partners administration update – the wait for dividends from Company X continues

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Krono Partners went into administration in September 2018. Unusually for an unregulated investment going into administration, its management claims there are more than sufficient assets to meet its debts, but after bank accounts operated for the company by Jade State Wealth were frozen, it became unable to maintain payments to investors.

The last update revealed that the repayment of investors’ funds was almost entirely dependent on a “Company X” operating an Exchange Traded Note platform, in which Krono had invested in return for a cut of any funds raised via that platform.

As at the latest update, filed by the administrators Smith & Williamson in April 2019, no such cuts have yet been received. Indeed the only funds recovered since the last update are £4,041 in cash in the bank.

Company X

The administrators reveal that “Company X” is in the process of raising £1.25 billion across 4 projects, plus a fifth project with “fund raise level to be determined”. The percentage that Krono can expect from these fund raises is not stated.

Two are described as being in their final stages, with completion anticipated in the next two and three months. Another is anticipated to complete its first tranche within two months. The fourth apparently has “good interest” despite being in an area with “an element of geo-political risk”, as a result of which “local investors to the specific region are the most likely funders”.

A further two small projects are reported to be ongoing, plus a further six projects that are currently inactive but may be active in the future.

The administrators are remaining tight-lipped as to who Company X is and what these specific projects are, “as to do so may jeopardise the success of the projects and ultimately recoveries for the Company”. Seems quite difficult to me to raise a billion and a quarter pounds in secret, but why not.

Other recoveries

Krono’s other assets include listed shares in a US company (recoveries: “likely to be negligible”), unlisted shares in the US (“uncertain”), micro loans (“has proved challenging… we are however currently exploring potential interest in acquiring these debts”), and intellectual property (“unlikely”).

All eyes therefore remain on Company X – as they were since the original Statement of Affairs showed that Company X accounted for almost 80% of anticipated realisations.

All a very far cry from Krono’s original investment memorandum for its “Distressed Asset Bonds”, which advertised that investment in distressed properties would provide “predictable, steady returns”.

Total recoveries now stand at £127k. Just over £10k has been paid out in legal fees and VAT, while Smith & Williamson has so far incurred fees of just over £100k.

The Financial Conduct Authority reviewed Krono Partners in 2014, shortly after launch. After four months it closed its case and took no further action.

Krono Partners administration report: £4 million of investors’ money depends mostly on a “Company X” in the Cayman Islands

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Last week the administrators of Krono Partners PLC, top-10 accountancy firm Smith & Williamson, published their initial report into the company.

Smith & Williamson was appointed as administrators after Krono Partners stopped paying interest on its bonds in March 2018. This was apparently due to bank accounts operated by Jade State Wealth, a subsidiary of Krono’s escrow partner Accounting Worx Limited, being frozen.

Why Krono Partners has been unable to find another payment administrator, if this was the only thing preventing it from making payments, and has had to undertake the dramatic (and expensive) step of going into administration, is not addressed by the administrators.

Who are Krono Partners?

Krono Partners invested in a range of investments via a company registered in Nevis (a small island in the West Indies) known as Krono Capital SA (or KC), to which investors’ money was loaned. KC is described as an “investment partner” by the administrators.

The initial management of Krono Partners at its incorporation in 2013 were Ivan Rosenschein (Managing Director), Glenn Teller (director), Ulrik Debo (Consultant Advisor), Rune Vind (Consultant Advisor) and Lenka Kalkovska-Vind (Head of Administration).

Glenn Teller left Krono in 2015 due to being abroad and not being able to devote enough time to the company.

Ivan Rosenschein left in 2016 as he had a business opportunity which required him to resign from all other companies. Rosenschein is currently working as a publicist for Danish actors and artists.

Vind and Kalkovska-Vind left also left in 2016 for “personal reasons”.

When Rosenschein left Krono, management discussed whether to wind up the company and repay bondholders early, or keep it running. They decided to keep it running and Rene Lauritsen, a partner of KC, was appointed sole director, with the entire share capital of Krono Partners transferred to him. How much Lauritsen paid to acquire the share capital of Krono Partners is not known.

In 2017 Krono’s investments were transferred from KC to Krono Partners, since when it has held investments directly rather than via the Nevis company.

Statement of Affairs

The administrator has identified a total of just over £4 million owing to creditors. This does not include the costs that Smith & Williamson will charge for the administration, which stand first in the queue. (Smith & Williamson’s fee basis has not yet been agreed with the creditors’ committee.)

The administrators’ Statement of Affairs contain a list of assets, provided by Krono’s directors, which have a total “Estimated to Realise” value of £5.7 million. The total amount used to purchase these assets (“Book Value”) were, according to the same table, just under £8 million. However, despite Krono Partners managing to lose c. 30% of its money in a 9-year bull market, it still apparently has £5.7 million to cover the total creditor claims of £4 million.

So, everything is fine and creditors can get paid as soon as Krono Partners has managed to find itself a working bank account. Right? Maybe. The administrators are at pains to point out that the list of assets comes from Lauritsen.

[6.1] We make the following observations:

* the estimated realisations are those of the director, creditors should be aware of the speculative nature of the investments

The administrators go on to say that despite the Statement of Affairs showing a surplus of assets over liabilities, the value of the assets is too uncertain to confirm whether investors are likely to get their money back.

[9] Estimated outcome for creditors

The joint administrators are not currently in a position to provide an assessment of the likely outcome for unsecured creditors given the uncertain nature of the Company’s investments.

Krono investors are being kept almost entirely in the dark as to what these investments actually are.

[7.1] We have not revealed the names of any of the entities in which the Company holds equity or debt investments or its joint venture partner in relation to ETNs [Exchange Traded Notes] as we consider this information to be commercially sensitive at this stage.

The assets of Krono Partners are listed in the administrators’ report as follows:

  • Listed shares: 42,500,000 shares in an unnamed US listed company, described as “restricted” due to the high proportion of shares owned by Krono. The administrators are working to obtain a share certificate for this shareholding; the first was lost in the post by the courier.
  • Unlisted shares: Krono has “a significant level of shares” in two unlisted entities (both in the US) referred to as Company A and Company B. Both are supposedly to be listed on stock exchanges (in the US and Canada respectively) within the next six months.
  • Micro loans: three micro loans totalling £532,608, one to the listed company mentioned above, and the other two to companies not already mentioned. The value of these loans has been written down to £398,493 by Lauritsen.
  • Other debtors: £85,000 from the realisation of an equity investment, which the administrators have since received.
  • ETNs: Krono has invested in an Exchange Traded Note platform run by “Company X”, a company registered in the Cayman Islands. In return, every time a company raises funds using Company X’s platform, Krono is entitled to a percentage of funds raised. None of these ETNs have concluded at the time of the administrator’s report (which means that Krono hasn’t yet seen any money from this investment), but 10 such fundraisings are reported to be in progress on this platform. Krono’s anticipated cut of these fundraisings accounts for £4.5 million of the £5.7 million anticipated by the director to be available to pay creditors, by far the largest part.
  • £93,289 in cash (which the administrators are trying to release to the administration estate account).
  • $49,729 in a share trading account with Interactive Brokers inc.

So in summary, whether there is actually enough money to pay investors depends largely on whether the anticipated returns materialise from Krono Partners’ investment in “Company X”.

This in turn depends on whether Company X is successful in raising corporate finance on its ETN platform on behalf of other companies, so that Krono gets its cut.

Whether these returns materialise will perhaps become clearer in the next administrator’s report. This will be due seven months after the start of the administration, i.e. April 2019.

Ulrik Debo, Krono Partners’ “Consultant Advisor” since inception, is also a partner in “Company X”. How this obvious potential conflict of interest was managed is not discussed in the administrator’s report.

Where did the £8 million come from?

As mentioned above, the list of assets provided by the director claims that £8 million was invested in the assets now owned by Krono (the book value column), which are now estimated to be worth £5.7 million (the estimated to realise column).

However, Krono Partners only raised a total of just over £4 million from its bonds – £3.5 million from its “Distressed Asset Bonds” lauched in 2013, and half a million from its “Micro Loans Bonds” launched in 2016. Where did the other £4 million come from? There’s no indication either in the list of creditors or in the list of shareholders.

Krono Partners PLC’s accounts filed to date (up to June 2016) contain no indication that it previously possessed £8 million in assets.

Another one for the administrators to clear up in due course.

Distressed property

Hang on a sec. Wasn’t Krono Partners supposed to invest in distressed properties, do them up, de-distress them, and sell them on to generate returns for bondholders? Its original bonds were even named “Distressed Asset Bonds”, from which the large majority of investors’ money came from (£3.5 million of £4 million). Why is almost all the money now in unnamed US companies and ETN platforms in the Cayman Islands?

According to the administrators, while Krono Partners management initially identified some distressed properties, and went so far as to have contracts in place, they realised that it would take 12 to 18 months to realise a return from these properties. This meant it would take too long to generate a return to meet its regular payments to bondholders.

One would think that Krono’s management should have spotted the screaming misalignment between their debt structure and their proposed project before they took money from investors and started trading, not afterwards.

It shouldn’t take an ICAEW member to see that if you propose to raise money from bondholders in exchange for bonds paying regular interest back to them, then either 1) You should have a project which is likely to generate continuous earnings from which interest can be paid. Or 2) If earnings will only be generated at the end of the project (i.e. when the distressed asset is sold), then bonds which roll interest up and pay interest at the end of the term would make more sense.

Perhaps former MD Roscenschein was better suited to promoting the shining stars of Scandi drama than the tedious business of corporate finance all along.

Anyway, this is now ancient history. While Krono Partners apparently invested in a few entities relating to property development at some point, the administrators note that none of the current assets of Krono Partners are property-related.

2014 FCA investigation

Another interesting fact to emerge from S&W’s report is that Krono Partners was investigated by the FCA in 2014, shortly after launch. The FCA reviewed the company and took no further action.

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

Breaking: Krono Partners goes into administration

Krono Partners logo

Krono Partners launched in 2013 and offered unregulated seven-year bonds paying interest of 8% per year, plus variable payments of 20% of the company’s assets. Krono Partners aimed to generate returns by investing in distressed real estate in the United States and Europe.

In 2017, with the distressed asset bonds approaching their five year anniversary, Krono Partners issued a further series of bonds, this time offering 10% per year over five years. This time investors’ money was to be used to invest in bridging finance for small and medium enterprises.

According to an investor on, Krono Partners stopped paying interest in the beginning of 2018, still two years shy of the repayment date of its 2013 bonds.

A Companies House filing yesterday reveals that Krono Partners has gone into administration.

More to follow when the administrator’s report has been made available.

How do I get my money back from Krono Partners?

If you invested in Krono Partners, 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. The administrators will not collect any fees directly from investors; the administrators always stand first in the queue and will collect their fees before any money is paid to investors (if any).

Whether there is any prospect of recovery from Krono Partners itself is in the hands of the administrators.