A property investment company operating a Ponzi scheme based on claims of capital appreciation and rental income has been shut down by the High Court.
It is accused of misusing almost £20m of investors’ money.
Essex and London Properties Limited (ELP), based in Kent, claimed to purchase properties with the intention of selling them on at a profit or getting rental income for investors.
Potential investors were approached directly or via intermediary platforms, who received 35 per cent of the offered partnerships in a Limited Partnership scheme.
A statement from the Insolvency Service says Investors were enticed to invest by offers of an eight per cent annual return paid quarterly if the money was held for three years or 12 per cent if the money was held for one year.
Over an 18-month period, more than 800 people each invested between £5,000 and over £100,000.
Essex Police, which has an ongoing investigation, calculates that to date, £18.9m has been obtained from creditors and investors.
However the reality was that ELP only purchased a single property - a house in Harwich for £147,000 which is less than one per cent of the overall amount of money collected from investors.
But the company gave information to investors claiming it had purchased numerous properties that had rapidly increased in value; it falsified Land Registry documents showing the company owned more property than it did.
Investors made payments through a number of escrow agencies. Insolvency Service investigators examined the income and expenditure of statements made by one of these agencies and found that existing investors received their interest payments, not from any meaningful return on their investment but from payments made by new investors.
“The company was in essence operating a Ponzi scheme” says the Insolvency Service.
The High Court heard the petition against the company which was unopposed and ordered the company into liquidation.
In a shocking turn of events, during the course of the investigation investors were approached by various recovery room businesses offering to recover the amounts, possibly in excess of the initial sums invested, in exchange of an advance fee.
One business falsely claimed to be authorised by the Chief Executive of the Insolvency Service.
The Insolvency Service says that any approach in this way to investors should be ignored and only communications from the Official Receiver, whose details are listed below, should be responded to.
“The Official Receiver has not authorised any third party to act on his behalf, especially in regards to recovering investors’ losses” says the statement.