Regulation  

Property investment scheme shut down by courts

Property investment scheme shut down by courts

A property investment company which operated a "Ponzi scheme" has been shut down by the High Court for misusing close to £20m of investors' money.

Essex and London Properties Limited (ELP), which was incorporated in April 2005 with a registered office in Kent, claimed to buy properties to sell them on at a profit or get rental income for investors.

Investors were enticed to invest by offers of an 8 per cent annual return paid quarterly if the money was held for three years or 12 per cent if the money was held for one year.

But in reality ELP only bought a single property: a house in Harwich for £147,000, which was less than 1 per cent of the overall amount of money collected from investors.

Despite only buying one property, the company told investors it had purchased numerous properties which had rapidly increased in value and it falsified Land Registry documents showing the company owned more property than it did.

As a result of the investigation by the Insolvency Service, the Secretary of State for Business Energy and Industrial Strategy issued the petition to wind up the company.

In September the High Court heard the petition against the company which was unopposed and ordered the company into liquidation.

David Hill, chief investigator for the Insolvency Service, said: "The company persuaded members of the public to part with substantial sums of money to invest in property. Only one property was purchased and the money raised from the public in reality was used to benefit those running the company.

"As so often is the case, if an investment scheme appears to be too good to be true, it probably is. There is an ongoing investigation into those individuals controlling Essex and London Properties Limited by Essex Police, who are liaising with the Crown Prosecution Service with a view to prosecuting a number of suspects."

The investigation found investors were approached directly or through intermediary platforms, which received 35 per cent of the invested amounts and offered partnerships in a Limited Partnership scheme.

Over an 18-month period, more than 800 people invested in the company anywhere between £5,000 to more than £100,000 and Essex Police, which has an ongoing investigation, calculated that to date £18.9m was obtained from creditors and investors.

Investors made payments through a number of escrow agencies. Insolvency Service investigators examined the income and expenditure of statements made by one of these agencies and found that existing investors received their interest payments from payments made by new investors rather than any meaningful return on their investment.

This led the Insolvency Service to claim the company was operating a Ponzi scheme.

In January 2018, the company placed itself into voluntary liquidation, claiming to have debts of more than £11m. The creditors, comprised mainly of the investors in the company, initially approved of the liquidation but later supported the Secretary of State’s petition.

During the investigation, investors were approached by various recovery room businesses offering to recover the amounts, possibly in excess of the initial sums invested, in exchange of an advance fee. One business falsely claimed to be authorised by the chief executive of the Insolvency Service.