A group of seven firms that were run from an office in Mayfair, London have been wound up by the high court.
The order followed an Insolvency Service investigation which discovered that Magna Group’s marketing of high-risk property mini-bonds was misleading and that the directors continued to take money from investors even after the firms became insolvent.
The principal directors of all seven businesses were Christopher Jon Madelin and Oliver James Mason, and the companies in question were:
- Four unregulated mini-bond investment vehicles – Magna Investments X, MIX2, MIX3 and MIXG – which raised £20m ($27.7m, €23.6m) from members of the public;
- An associated group and brand holding firm, Magna Asset Management;
- An operational business, Magna Project Management; and,
- A consultancy/administration company, MIX Ops.
All of the firms were incorporated between December 2014 and March 2019 and were registered at the same London address in Berkeley Square.
Following the Financial Conduct Authority’s ban on the mass-marketing of mini-bonds to retail investors, the Insolvency Service said it found Magna’s marketing to be misleading “with material overstating both the levels of security being offered and the true protection offered to them from the appointment of a ‘security trustee’”.
Sending a ‘strong message’
The two principal directors are believed to have been the beneficiaries of £2.5m through director loan accounts, after securing deposits from investors.
MIX3 and MIXG took over £2m in deposits from loan note creditors between December 2019 and February 2020, a period during which the directors “ought to have known” the companies were insolvent, the Insolvency Service said.
At that point, MIX2 had failed to pay its loan note holders, leading to a “default event” in all four MIX to MIXG loan note instruments.
But during that time the directors paid themselves £425,021 and an additional £370,471 was loaned to a non-UK company in which they had shareholdings.
All seven companies were wound up on 10 August 2021 in the high court and the Official Receiver was appointed liquidator.
One of the tasks for the Official Receiver, besides realising assets of the companies, will be to look into the directors’ conduct and assess any wrongdoing and/or grounds for disqualification, the Insolvency Service confirmed to International Adviser.
Edna Okhiria, chief investigator at the Insolvency Service, said: “Investors in the MIX companies were systematically given false comfort that their investments were to be ‘asset-backed’ by tangible ‘bricks and mortar’ security, when in reality this was not the case and highly misleading.
“Marketing and publicity material circulated to investors presented a false picture of the group’s strong financial health and the companies induced investors to invest over £2m after December 2019 at substantial risk, with the knowledge it had stopped repaying existing investors and therefore there was no reasonable prospects of repaying these sums.
“Investments in speculative mini-bonds are inherently high risk and the FCA has banned their mass-marketing to retail investors.
“The Insolvency Service has acted, applying to court for the group of companies to wound up in the public interest to protect others from becoming victims, and to send a strong message to like-minded perpetrators that behaviour of this nature will not be tolerated.”
