Investors lose out as bogus schemes shut down

A group of investment firms that Money Observer has repeatedly warned about since 2012 have been shut down by the High Court on grounds of public interest.

The firms sold investors carbon credits, which are certificates permitting a company to emit a tonne of carbon dioxide, at hugely inflated prices.

The 13 companies marketed voluntary carbon credits from the supplier at the centre of the labyrinth, Eco-Synergies Ltd, which bought credits for 65p each, selling them to investors through the firms for up to an 869% profit, effectively making £19 million on a £2.3 million outlay.

There is very little market in trading voluntary carbon credits, as Money Observer has long been at pains to point out, and despite persistant legal action from one of the main companies in the web, MH Carbon Limited, we have continued to explain clearly to readers the weaknesses of these investment schemes, and the frequently chequered careers of their directors.

The Insolvency Service estimates that "hundreds, possibly over a thousand, individual investors have been affected by the 13 firms". The latest action takes the total number of carbon credit firms closed by the Insolvency Service to 32. The 19 other companies took nearly £24 million from over 1,500 investors.

No recourse

Chris Mayhew, company investigations supervisor at the Insolvency Service, said: "The credits were sold at such inflated prices that an unnatural increase in value would be required before investors could break even, let alone see a return on their investment."

There is no recourse for investors who have lost their money, however, as the investments were not regulated and the credits that were sold are still held in their respective nominee companies and available to sell, even if that is not possible in practice.

In addition to MH Carbon Limited, the other companies wound up in the High Court are Alternative Capital Limited, Beta Commodities Limited, Capital Acquisitions Ltd, City Asset Partnership Ltd, Cleartrade Limited, CT Carbon Limited, New Frontier Advisory Ltd, Wealth Capital Ltd, World Commodity Trading Limited and Worldwide Commodity Partners Limited.

We devoted much effort to exposing MH Carbon, which was the company most actively targeting our readership, revealing for example that Richard Beese, David White and Thomas Knifton, who also had interests in some of these firms, had previously founded Montague Pitman.

This was the appointed representative of Falcon Securities, which was censured by the Financial Services Authority for Montague Pitman's poor sales practices during a period when Beese was head of retail and client relationships. The firm would have been fined £240,000 in January 2010 but for the fact that it sought administration.

As well as their involvement in MH Carbon, Richard Beese, David White and Gavin Manerowski have at one stage been shareholders of Eco-Synergies Ltd, the company at the centre of the carbon credits web.

What concerns us today however is that directors of failed firms such as these are perfectly free to set up other investment schemes.

Our advice is not to invest in any unregulated investment firm unless you have verified the directors and checked that setting up and dissolving companies is not one of their serial pastimes.

In February, the High Court also ruled that two investment schemes, promoted by Capital Alternatives and a number of other firms, were collective investment schemes, but promoted and operated without Financial Conduct Authority authorisation.

The defendants in this case had structured their schemes to try to avoid the need for regulation by the FCA, but the High Court agreed with the FCA that the schemes were in fact unauthorised collective schemes.

The FCA has therefore been able to take legal action in respect of these schemes, in contrast to the Eco-Synergies case.

The schemes involved were African Land (also known as Agri Capital) which offered investments in rice farm harvests in Sierra Leone, and Reforestation Projects (also known as Capital Carbon Credits) which offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia.

Readers with long memories will recognise the defendants in that case from our coverage in the magazine - names such as Capital Alternatives Limited, MH Trustees Limited, Marcia Hargous, Renwick Haddow, Richard Henstock, Robert McKendrick, Mark Ayres/Eyres and David Waygood, whose estate is being sued following his suicide by jumping in the way of a train at a railway crossing in Otford.