The UK high court has forced two investment companies to shut down after discovering their fund-raising activities were carried out “entirely without substance”.
The Insolvency Services found out that Minerva Development Group and Cohesion Business Development raised £2.85m ($3.66m, €3.12m) from investors through the issuing of bonds.
Clients were told that their money was made secure via a ‘security trustee’ – in this case Cohesion Business Development – which would oversee the application and banking of funds.
Minerva promised returns between 7% and 16.9%; which, the Insolvency Service said, is way above the typical return offered by regulated investment products.
The 70 investors paid their funds into non-company bank accounts, escrow accounts or onto pre-paid cards.
The Insolvency Service, however, discovered that these accounts were not safe and that the security trustee – which initially was a firm called Glaxicon before the mandate was given to Cohesion – provided no protection at all.
Double whammy
Investors started complaining about Minerva before the Insolvency Service begun its investigation into the firm.
Some of them even reported the company to the police when they claimed they didn’t receive any investment returns and Minerva failed to communicate with them.
As a result, the investment company’s website was shut down it stopped issuing more bonds.
But there were more troubles ahead for investors.
Several “recovery” agents approached them promising to recoup their investments, all for an advanced fee.
The Insolvency Service said that these agents “fabricated their legitimacy and one firm falsely told investors that they had been instructed by the Insolvency Service, misleading clients into believing Minerva Development Group was in the process of going through a liquidation”.
Neither Minerva nor Cohesion were regulated and failed to cooperate with the investigations.
‘Nothing but a scheme’
David Hill, chief investigator for the Insolvency Service, said: “Minerva Development Group persuaded clients to part with substantial sums of money to invest in property bonds with the promise of extremely generous returns.
“In reality, this was nothing but a scheme and our investigations found that no funds were invested into bonds but instead used to benefit those running Minerva Development Group and a connected company, Cohesion Business Development.
“The courts recognised the severity of the companies’ misconduct and closed them down to protect any further investors coming to harm.
“We urge potential investors to carry out rigorous due diligence to ensure they use their funds on legitimate investments.”
