By Chris Lang
In January 2019, an investment scheme called London Capital & Finance went into administration after an investigation by the Financial Conduct Authority.
London Capital & Finance sold mini-bonds and promised fixed returns of 8% on a three year investment. The company convinced more than 11,500 people to hand over a total of almost £238 million.
London Capital & Finance lent the money it raised to a network of linked companies:
- London Oil & Gas Limited (in administration): £124,083,128
- LPE Support Limited: £18,460,382
- Cape Verde Support Limited: £7,268,038
- CV Resorts Limited: £4,796,834
- Waterside Villages Limited: £15,733,152
- Waterside Support Limited: £5,084,345
- Costa Support Limited: £6,603,543
- Costa Property Holdings Limited: £20,872,447
- Colina Support Limited: £5,654,890
- Colina Property Holdings: £16,196,319
- FS Equestrian Services Limited: £12,261,270
- London Financial Group Limited (in liquidation): £839,776
Several of the directors of London Capital & Finance were also directors of the companies that received loans from London Capital & Finance.
Robert Mannering Sedgwick
Robert Mannering Sedgwick was at one time or another a director or secretary of ten of the companies receiving loans from London Capital & Finance (the exceptions being FS Equestrian Services Limited and London Financial Group Limited).
In a 2017 sales brochure, London Capital & Finance reassured investors that their money was protected:
The Bonds are secured by a debenture (a form of legal charge) over all the assets of LC&F (the secured assets), which is held by an independent trustee on behalf on Bond Holders. The secured assets include the cash reserves in the business and the security taken from Borrowing Companies. The nominated Security Trustee is Global Security Trustees Limited.
From 28 October 2015 (when the company was registered) until his resignation on 31 March 2018, Robert Sedgwick was director of Global Security Trustees. Until January 2019, the majority shareholder in Global Security Trustees was a company called Oracle Ltd, registered in Malta.
Sedgwick was a solicitor with Buss Murton Law LLP in Tunbridge Wells.
In November 2015, London Capital & Finance’s website stated that,
The company has placed assets in the form of land and property with Buss Murton Law LLP who ensure there is always 100% coverage over any liabilities. BM Law hold a debenture over the assets provided by the company in favour of the bondholders.
When The Times asked Alex Lee, a partner at Buss Murton Law, about this in April 2019, Lee replied that the firm “have never had a debenture over London Capital & Finance and no one from this firm authorised this or any other statement being made of this kind”.
After Sedgwick resigned as director of Global Security Trustees, he was replaced by . . . Alex Lee.
Sedgwick was suspended from practising as a solicitor for one year from 14 February 2018, following a hearing before the Solicitors Disciplinary Tribunal.
Sedgwick had been involved in four “dubious” investment schemes. Two involved sales of carbon credits as investments, one involved sales of diamonds, and one sales of fine wines.
Two of these “dubious” investment schemes involved the sale of “carbon benefit units” from the April Salumei REDD project in Papua New Guinea.
For an overview of this strange story of how the worthless carbon benefit units went from Papua New Guinea, via Switzerland and a registry in the Cayman Islands, to boiler rooms in London and ultimately to retail investors, see this REDD-Monitor post:
“Dubious” investment schemes
The report of the Solicitors Disciplinary Tribunal hearing is well worth reading. It includes two jaw-dropping statements.
The first statement comes from Sedgwick. It is dated 29 January 2018 and is his “Statement in mitigation”. It was apparently accepted at face value by the Solicitors Regulation Authority:
At no time whilst I was acting for these clients did I have the opinion that they were marketing a “dubious investment scheme”.
Sedgwick even claims to have,
carried out as much research as I was able into the bona fides of the clients and I did not, in the references and searches, on the internet discover anything which led me to consider that they may be dishonest or bogus
And he concludes that,
Having carried out my due diligence I did not uncover anything that could reasonably lead me to suspect that the clients were marketing a dubious investment scheme and in the absence of such evidence I felt that I had no reason to refuse to act for them.
Sedgwick had to face the Solicitors Disciplinary Tribunal because of a complaint to the Solicitors Regulation Authority in July 2014 from someone who had been conned into buying in Carbon Benefit Units from April Salumei as an investment.
This Purchase Application Form was filled in by the unfortunate buyers of April Salumei’s “carbon benefit units”. It specifies that payments should go to Buss Murton Law’s bank account:
The retail investor paid £80,000 to Buss Murton Law’s bank account. Unfortunately, the Solicitors Disciplinary Tribunal hearing does not disclose the name of scammers, and refers to the company involved only as “Client 1”.
The investor received certificates confirming his investment. The carbon benefit units were “deposited with a registry in the Cayman Islands” – presumably IFIT Fund Services (Cayman) Ltd, one of the companies mentioned on the Purchase Application Form, above.
IFIT is closely related to World Markets AG, the Swiss company that bought the Carbon Benefit Units from the April Salumei project developers in Papua New Guinea. IFIT and World Markets share a director (Rolf H Küng), and share an address in Zurich. The directors of the April Salumei project developers, Stephen Hooper and Sean Lewis, were also directors of World Markets.
The investor told the Solicitors Regulation Authority that,
I worked hard for my pension and feel that it has been stolen from me. If it wasn’t for Buss Murton being involved in the process which gives it credibility I would never have invested with [Client 1].
When he decided to sell his carbon benefit units, the investor was unable to contact anyone at Client 1, and Buss Murton did not respond.
In November 2015, the High Court shut down eight companies for selling carbon credits as investments from the April Salumei REDD project: London Carbon Neutral Ltd, Blakeney Bridge Wine Ltd, Blakeney Bridge Ltd, Savi IT Ltd and KMD Energy Solutions Ltd, Earthsky Limited, and two British Virgin Island companies Consolidated Carbon Projects Limited and WK Investments Holdings Limited.
Two years earlier, the High Court ordered another scam company, Industry RE, into liquidation – also for selling carbon credits from April Salumei as investments.
REDD-Monitor first wrote about Industry RE in March 2012. Back then, it was transparently obvious that the company was involved in a scam. The Financial Standards Authority first warned about investment scams involving carbon credits in 2011.
By 2018, when Sedgwick was in front of the Solicitors Disciplinary Tribunal, any remaining doubt had long since gone.
The second jaw-dropping statement in the Solicitors Disciplinary Tribunal hearing is the following description of the voluntary market in carbon credits:
Outside the EU, a further trade developed based on the idea behind the Kyoto Protocol. Large-scale eco-projects have developed in places such as India, China, USA (i.e. wind farms and hydro waste projects). These projects work to produce calculated volumes of oxygen. Oxygen production is then calculated per tonne emitted and recorded as carbon credits (sometimes referred to as “units” or “carbon credit tonnes”).
Obviously, wind farms do not produce oxygen. Yet this bizarre statement appears in the “Statement of agreed facts and outcome” in the Solicitors Disciplinary Tribunal hearing!
Why Sedgwick offered Buss Murton Law’s bank account to four “dubious” investment schemes is a bit of a riddle.
The Solicitors Regulation Authority states that, “It is well established that a solicitor should not act as an ‘escrow agent’ and therefore any client requesting this service but not seeking any legal advice or services ought to be regarded with extreme suspicion.” No kidding.
In April 2009, the Solicitors Regulation Authority put out a warning notice titled “Fraudulent financial agreements”, warning the legal profession to avoid getting involved in dubious financial arrangements.
The warning notice explains that,
The fraudster wants to be associated with the legitimacy and respectability which, as a person or firm regulated by the SRA, you provide…
The warning notice states that “If you are not wholly satisfied as to the propriety of the transaction, you must refuse to act.”
On 15 July 2011, Client 1 sent Sedgwick a suggested sales process:
Buyer agrees deal with [Client 1] and fills in Registry Purchase Application Form (RPAF) which has no pricing details, this is then scanned and sent to [Client 1] lawer and [Company I]. Buyer also signs [Client 1] PAF which has retail price on and [Client 1] as sellers. Money goes into [Client 1] escrow to be settled against buyers holding showing on registry. [Client 1] lawyer confirms AML completed to [Company I] and registry (records to be maintained so registry audit could inspect if required).
There is a weekly (can be daily or whatever is needed) deal with [Client 1] buying from [Company I]. This would be for all buyers that have confirmed AML and RPAF. [Client 1] would fill in the bulk trade form (BTF) for the total amount of units plus names, e-mail and quantity for each buyer. This is sent to [Company I] and their escrow lawyer.
[Company I] do exactly the same with the registry using another BTF with [Company I] as the buyers settling to the individuals. [Company I] confirm the figures match up with RPAF and that AML confo has been sent by [Client 1] lawyer then present registry with full package. [Registry K] e-mails account login details to each buyer and confirms completion to [Company I] escrow.
I expect lawyers can word something to allow Client 1] escrow to release funds to [Company I] escrow against delivery – see what your guy thinks. Either way needs to be confirmation of funds before registry makes the entries.
Buyer sends money to be held in escrow against entry of buyers interest on registry, escrow 1 send money to escrow 2 against entry of buyers interest on registry, [Registry K] confirms deals and cash flows!
Company I was registered in the British Virgin Islands. The registry was in the Cayman Islands. Client 1’s company had only existed for one year.
How on earth did Sedgwick, a solicitor with more than 40 years experience, manage to treat this proposal with anything but “extreme suspicion”?
The April 2009 warning notice from the Solicitors Regulation Authority states that it “takes strong action against those it regulates who appear to facilitate fraud”.
But the Solicitors Regulation Authority managed to give Sedgwick the benefit of the (pretty much non-existent) doubt. Instead of being banned for life as a solicitor and fined heavily, Sedgwick was let off with a year’s suspension.
No further investigations were carried out into the activities of his companies.
Which is a pity. In the second half of 2016, the Solicitors Regulation Authority carried out what it calls a “Forensic investigation”. Unfortunately this investigation failed to notice that Sedgwick was deeply involved in a more than £230 million investment scheme with London Capital & Finance.