Regulation  

Trio which misled investors to raise millions shut down

Trio which misled investors to raise millions shut down

A trio of companies which misled clients to raise millions of pounds in funds under the guise of property investments have been wound up by the courts. 

An investigation by the Insolvency Service found London-based property investment firms Rationale Asset Management and Value Asset Management had "entirely misled" investors and millions of pounds without making any "genuine" investments.

Rationale raised more than £2m from investors after telling prospective clients it purchased and developed businesses such as care homes, hotels and pubs to sell on for a profit. 

But according to the Insolvency Service only a fraction of the funds was investment in property, with most of the money used to pay the directors of Rationale and used for other companies in which the directors had a controlling interest.

Rationale also secured £1m of funding from pension scheme Optimum Retirement Benefits Plan, which had previously been investigated by both the Insolvency Service and The Pensions Regulator following allegations it was linked to pension liberation activity.

The Insolvency Service said the second property company, Value Asset Management, was closely linked to Rationale and subject to a parallel investigation which found it sold bonds to investors claiming they were secured against property assets.

But investigators found Value's marketing materials were misleading and its accounts showed it was insolvent and owned no property.

Value had also received £200,000 from Rationale, to no benefit to the latter's investors.

David Hill, chief investigator for the Insolvency Service, said the companies had "entirely misled" investors by taking millions of pounds without "making any genuine investments".

Mr Hill said: "There is no evidence that Value Asset Management ever commenced any property development projects and all of Rational Asset Management’s investors have been left with worthless shares.

"The courts recognised the severity of their misconduct and these companies have been wound up, putting a stop to this ongoing pattern of harmful business practices.

"We also urge anyone considering investments of this type that they should always take independent financial advice before doing so." 

Investigations found a third company linked to Rationale, Merydion Corporation Limited, received £300,000 of funds from the same pension scheme Optimum Retirement Benefits Plan. 

Merydion then used the money to invest in hotel properties the director of the company owned under separate entities. 

rachel.mortimer@ft.com