United States of America versus Renwick Haddow

On 30 June 2017, the Securities and Exchange Commission filed a legal complaint against Renwick Haddow. The SEC alleges that Haddow fraudulently raised almost US$38 million from investors. The SEC has obtained an emergency asset freeze against Haddow and his companies named in the complaint.

On the same day, federal prosecutors announced a criminal complaint in Manhattan federal court, accusing Haddow of “engaging in schemes to defraud victims by soliciting through material misrepresentations, and misappropriating investments”.

The SEC complaint is available here, and the criminal complaint – an affidavit from Melissa Beresford, a Special Agent with the Federal Bureau of Investigation – is available here.

Beresford’s affidavit ends as follows:

WHEREFORE, deponent respectfully requests that a warrant be issued for the arrest of RENWICK HADDOW, the defendant, and that he be imprisoned or bailed, as the case may be.

InCrowd Equity

In November 2014, a few months after the High Court in London ruled that Haddow’s Capital Alternatives network of companies was running an illegal collective investment scheme, Haddow created a company called InCrowd Equity Inc. Haddow didn’t register the company as a broker-dealer with the SEC.

He hired sales brokers by advertising on Craigslist. The brokers needed neither broker’s licenses nor any experience in the financial industry. They cold called people to sell them securities in “at least two companies he created and controlled”, the SEC writes in its complaint. The two companies were Bitcoin Store and Bar Works.

The FBI’s Beresford spoke to an employee of InCrowd Equity who heard brokers “badgering, harassing and shouting at prospective investors”.

SEC comments on the materials that Haddow produced for his companies:

These materials contained no mention of Haddow, touted the backgrounds of senior managers who appear to be non-existent, and misrepresented other material facts about Bitcoin Store’s and Bar Works’ operations, as Haddow knew or recklessly disregarded.

Bitcoin Store

Bitcoin Store was incorporated in Delaware in December 2014. Haddow was the company’s sole director. InCrowd Equity’s sales brokers sold Bitcoin Store securities. Between May 2015 and December 2015, they raised more than US$700,000 from about 50 investors. InCrowd Equity used the money to pay its operating costs, including sales brokers’ salaries and commissions.

Bitcoin Store claimed that the company “offers an easy-to-use and secure way of holding and trading Bitcoin”. The company claimed that it earned revenue by charging a 3% commission on bitcoin trades and an annual fee of US$35.

The SEC points out that Bitcoin Store made a series of claims that were “false or misleading”.

For example, Bitcoin Store claimed to have an “experienced team of leading of leading investment professionals who come from various areas of the market”.

The company claimed that its CEO, Gordon Phillips, was previously “Global Head of Currency and Options trading” at HSBC, and had worked at Deutsche Bank. He had an “MSc in finance from Yale”.

Bitcoin Store’s COO, Joseph Bilkhorn, was supposed to have been “Chief Financial Officer and Head of Operations” at Credit Suisse, and an “operations officer” at Deutsche Bank.

These careers were made up. According to the SEC, Phillips and Bilkhorn are fictitious people. Haddow’s name did not appear on company documents.

By April 2015, Bitcoin Store claimed to have generated sales of US$7.6 million. The reality was that only US$250,000 had gone into Bitcoin Store’s bank accounts. Of this, at least US$87,000 was raised from investors in Bar Works.

Bar Works

Bar Works was registered in Delaware in July 2015. Haddow is the sole director.

From about October 2015 to February 2016, Haddow used InCrowd Equity to sell Bar Works securities to investors. InCrowd Equity raised US$76,000. After February 2016, “Haddow also used marketers to sell Bar Works securities to investors inside and outside the United States”, the SEC states in its complaint.

Bar Works sold leases for more workspaces than actually existed. Bar Works 39th Street had less than 70 workspaces. But in four months from October 2015, Bar Works sold leases for 112 workspaces at that location.

Bar Works 7th Avenue had 95 workspaces, but between February and May 2016, the company sold leases for 180 workspaces.

By April 2017, Bar Works had raised more than US$35 million. The investors’ money was pooled in at least three bank accounts belonging to Bar Works. Haddow was the sole authorised signatory for these bank accounts. The SEC states that Haddow transferred more than US$4 million to bank accounts in Mauritius and US$1 million to Morocco.

In her affidavit, the FBI’s Beresford states that Haddow transmitted at least US$18 million from Bar Works’ bank accounts to bank accounts in more than 40 countries. Some of this money could be payments to individual investors. But at least US$16 million was to bank accounts that received more than US$100,000, making it unlikely that these were payments to investors.

In a September 2015 press release, Bar Works claims that Jonathan Black was the founder and chief executive of the company:

“Jonathan has a background in finance and start-up ventures. He was a finance director/financial controller of two chains of bars in the UK (Regent Inns Plc – market value US$400m). He has also set up a number of new ventures, including recently ‘Car Share’, a car sharing APP.”

Chloe Miller was “Operations Executive”. In later Bar Works material her name changes to Zoe Miller. The SEC notes that these were pseudonyms used by Haddow’s wife. Jonathan Black was a fictitious person, according to the SEC.

FBI agent Beresford spoke to a “master sales agent” (Agent-1) for Bar Works. Beresford states that,

Agent-1 never met “Jonathan Black” and based on his interactions with HADDOW and other associates of HADDOW, understood the “Jonathan Black” identity to be HADDOW’s alter ego.

Haddow’s name did not appear in Bar Works’ press releases or on the company’s website. In its complaint, the SEC notes that the representations and omissions in Bar Works’ materials were “false or misleading”.

The SEC accuses Bar Works of running a Ponzi scheme:

Until approximately April 2017, Bar Works and its affiliates paid the monthly interest fees of investors with Leases on workspaces in the 39th Street Location at least in part from the investments of later Bar Works’ Lease investors, as Haddow knew or recklessly disregarded.

Beresford writes that “Bar Works systematically stopped paying investors their guaranteed payments at least as of about April 2017.”

Haddow has been charged in the criminal complaint with two counts of wire fraud, one relating to Bitcoin Store and one to Bar Works. Each charge carries a maximum prison term of 20 years.

The ‘F’ word

Later this month, the UK Financial Conduct Authority has another case against Haddow and Capital Alternatives in the High Court in London. In a statement, the FCA says one of the issues is “misleading statements which we allege were made to investors in relation to these schemes”.

In March 2016, a sales agent for Bar Works discussed the FCA’s case with Haddow in an email. The subject line was “‘F’ Word”. The sales agent recommended that Haddow should hire “great lawyers”. And have a “[m]assive distance to special place (hard to get back)”.

Haddow replied, “I agree with you totally.”