IoM's Quadris Environmental Fund declared in default

Added 18th July 2017

Isle of Man-based Quadris Environmental Fund has been declared in default by its American lender and had its bank accounts frozen, leaving around 1,200 investors fearing they will lose all or most of their investments.

IoM's Quadris Environmental Fund declared in default

American hedge fund Crestline Arvore has said the fund is in default and appointed a joint receiver, Craig Mitchell and David Craine of Brown Craine & Co, reports local newspaper the Isle of Man Courier.

Quadris was set up on the Isle of Man in 2001 as a multi-class qualifying fund that invested in teak forestry plantations in Brazil.

The fund posted a $20m (£15.3m, €17.4m) loss in 2016, with auditors expressing concern about the company’s ability to continue trading.

A letter to shareholders, dated 20 February, advised that the Isle of Man Financial Services Authority (IoMFSA) had named Gordon Wilson as controller of Quadris.

The regulator also launched an investigation into the fund in March 2017.

Default not certain

Investors, however, have insisted that the fund is still viable and it has sufficient assets to pay off the lender at any time.

Stephen Metcalf, a Warsaw-based partner at Synergi Investment representing £7m of investment in Quadris, told newspaper the Manx Independent: “Crestline, as the lender, is claiming that there have been a number of defaults on their loan and have therefore decided to appoint a receiver, to place their own representatives onto the board and to proceed to run the fund, obviously to their own significant benefit.

“Legal opinion as stated by lawyers from both New York and the Isle of Man is that the default is by no means certain. Surely, the regulator cannot sit back and do nothing while claiming to be protecting the interests of shareholders.”

Metcalf added: “Shareholders find it incomprehensible that the underlying assets that they bought remain intact and offer significant value and yet they stand to potentially lose either a significant part or possibly all of their money.”

Regulatory reproof

Other advisers from around the world have also criticised the IoMFSA for not doing more to help.

In June, Shanghai-based financial adviser Adrian Page contacted International Adviser to say that he had lodged a formal complaint with the IoMFSA.

Page, managing director of Financial Page International, told IA: “In my opinion the IoMFSA seems to have completely deserted the investors as we stand today.”

Outside the remit

In response, Karen Badgerow, chief executive of the Isle of Man regulator, reiterated to IA that the Quadris fund, as a qualifying fund, was not licenced or authorised by the IoMFSA and should not have been sold to the general public.

"The Authority's remit for such schemes is to register them, receive notifications of change and supervise their appointed Isle of Man functionaries," Badgerow said.   

In May, Isle of Man treasury minister Alfred Cannan confirmed that the IoMFSA is “undertaking a review” of unregulated funds and will “make appropriate recommendations for change”.

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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