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£20m ‘Ponzi’ property scheme shut down

The High Court has shut down a Ponzi scheme operated by a property investment firm after ruling that it was misusing close to £20m of investors’ money.

Having been incorporated more than 13 years ago, Essex and London Properties Limited (ELP), which has a registered office in Sidcup, Kent, claimed to acquire properties with the intention of selling them on at a profit or getting rental income for investors.

A number of investors, many of which were approached directly or via intermediary platforms, were enticed to invest by offers of an 8% annual return paid quarterly if the money was held for three years or 12% if the money was held for one year.

Over an 18-month period, more than 800 people invested in the company anywhere between £5,000 to over £100,000, with Essex Police, which has an ongoing investigation, calculating that to date, £18.9m has been obtained from creditors and investors.

It transpires that ELP only bought a single property; a house in Harwich for £147,000, which is less than 1% of the overall amount of money collected from investors.

Despite acquiring just one property, the company gave information to investors claiming it had acquired several properties that had rapidly increased in value and 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.

As a result of the investigation by Company Investigations of the Insolvency Service, the Secretary of State for Business Energy and Industrial Strategy issued the petition to wind up the company.

The High Court heard the petition against the company which was unopposed and ordered the company into liquidation.

During 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.

In January 2018, the company placed itself into voluntary liquidation, claiming to have debts of over £11m. The creditors, comprised mainly of the investors in the company, initially approved of the liquidation but later supported the Secretary of State’s petition.

Judge Barber as part of her judgement said that on the evidence, this was a case “crying out for a public interest winding up”.

David Hill, chief investigator for the Insolvency Service, said: “The company persuaded members of the public to part with substantial sums of money to invest in property. Only one property was purchased and the money raised from the public in reality was used to benefit those running the company.

“As so often is the case, if an investment scheme appears to be too good to be true, it probably is. There is an ongoing investigation into those individuals controlling Essex and London Properties Limited by Essex Police, who are liaising with the Crown Prosecution Service with a view to prosecuting a number of suspects.”

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