The directors of a group of companies that sourced funds from investors to purchase and renovate student housing in the UK, have both been given been given a 21-month prison sentence.
Liam Collins and David Bone are already facing a 14-year bankruptcy restriction ending in 2027, and plead guilty to participating in fraudulent business at Manchester Crown Court on 7 June 2019.
They had been directors of a number of companies, all falling under the CBS Group, which failed in 2009 by entering into voluntary liquidation and owing investors over £3m ($3.8m, €3.3m).
However, instead of allowing the investors to become creditors, the pair promised to pay their investments back with interest within an unspecified number of years.
Old dog, same tricks
But in January 2010, the two directors set up another company under the name of Collins and Bone Partnership, offering different investors the chance to finance the purchase and refurbishment of student accommodations.
Subsequently, in May 2010 the pair were told by financial regulators that their activities were in breach of law, and they were advised to inform investors that they wouldn’t be able to seek financial compensation if things went wrong.
But the two kept sourcing investment, securing around £274,000 in the five-month period, by attracting investors with incredibly high interest payments and promises of “safe investments”.
Fake investments
The money, however, was not used to invest in student housing. Collins and Bone used it to pay off their original investors, which included selling debt on 27 properties that they had carried over from the CBS Group.
“Liam Collins and David Bone showed a callous disregard for the investors and sought even more funds, even after being warned that their actions were dishonest,” said Michael Talbot, senior lawyer for the UK Insolvency Service.
“The court’s decision to impose custodial sentences should serve as a stark warning to other rogue directors and traders that The Insolvency Service will strenuously tackle financial wrongdoing in order to protect members of the public.”
