It was, in line with her monetary adviser on the time, “a real winner” and as safe as homes. So, virtually seven years in the past, Alison Moncrieff-Kelly invested £80,000 of her inheritance in a German property company.
The firm, then referred to as Dolphin Trust and now recognized as German Property Group (GPG), described itself as “master builders and monument experts” and “Germany’s market leader in redeveloping listed buildings”.
By restoring historic buildings and turning them into luxurious flats, benefiting from German tax breaks, it stated it would offer traders with double-digit returns.
Moncrieff-Kelly, 59, a contract musician from Kent, is certainly one of thousands of UK people who invested greater than €300m (£260m) of pension money and different financial savings in Dolphin over a interval of a number of years earlier than the company collapsed final summer time.
In complete, it owes greater than €1bn to traders everywhere in the world, though primarily in Britain – the place there are an estimated 6,000 affected people – Ireland and Asia.
It is certainly one of quite a few funding schemes the place small UK traders have lost money in recent times. Moncrieff-Kelly, a classical cellist, additionally lost out after investing in a scheme referred to as Harlequin Property, which was initially backed by well-known names and promised excessive returns.
“I relied on my financial adviser totally: he told me this [Dolphin] was a guaranteed 10% return and absolutely safe, as the investment was in buildings, which have an intrinsic value,” she says.
“The fact it was German was the icing on the cake – it seemed so safe. He also told me that the company was well run.”
Dolphin was based within the city of Langenhagen, close to Hanover, in 2008 by Charles Smethurst, a German-British businessman. When the company, by then renamed GPG, filed for insolvency in Bremen in July 2020, it had about €200,000 within the financial institution and 60-70 properties on its books – although most of them had been run-down and had been by no means developed.
The public prosecutor’s office in Hanover has begun an investigation into alleged fraud and different offences by Smethurst and two different company officers.
According to German media, this might be Germany’s largest alleged property fraud in a decade.
Moncrieff-Kelly invested £80,000 in Dolphin mortgage notes in October 2014, which the company stated had been secured in opposition to property, after her monetary adviser advised it. When she first met him, he labored for a Bristol-based firm, and, she says, she had no concept that he was promoting unregulated merchandise.
If monetary companies aren’t authorised and controlled by the UK’s Financial Conduct Authority (FCA), such as Dolphin or GPG, traders can’t use the Financial Ombudsman Service or the Financial Services Compensation Scheme if issues go fallacious.
Advisers or introducers had been usually paid fee of 20% to 30% by Dolphin – however Moncrieff-Kelly says she didn’t know this on the time and doesn’t know if her adviser obtained that degree of fee.
“I’m an inexperienced investor – until I inherited the money from my mother’s estate, I had modest means and very little investment.”
Like different Dolphin traders, she obtained common curiosity funds – in her case, a complete of £12,000 – however, two months earlier than her funding was on account of be returned in October 2019, she obtained a message from the company saying that it couldn’t give her the projected £100,000 payout.
The Guardian has spoken to a couple of dozen Dolphin traders, none of whom have had their money returned.
Deborah Kay Randles, 62, a former TSB worker who lives in York, says she invested £25,000 in Dolphin.
“I was never told it was a risky investment – I was told it was an investment in listed buildings. There were no warnings it would go tits-up,” says Randles, who now works as a marketing consultant for a window blinds business. “It’s £25,000 that I would have liked for my retirement. I had my eye on a new car but that’s not going to happen.”
Roger Feist, 55, a former operations director for a world packaging company, says he was suggested by an introducer in 2015 to switch his £185,000 personal pension he held with Aviva right into a small self-administered pension scheme and to take a position most of it in two Dolphin Trust mortgage notes paying 10% annual curiosity.
“In 2019, I was starting to get a bit shaky because I was getting calls from claims companies every day asking me whether I’d invested in Dolphin,” Feist says.
He travelled to Berlin and met Smethurst and in addition a person referred to as Mike Boyle, whose company did “client relations” for Dolphin. Feist was proven two developments: a former energy station in Berlin and an East German submit office that was being transformed into flats and was near completion. He says Smethurst told him that his mortgage notes had been secured in opposition to the previous energy station. “Smethurst seemed totally credible,” says Feist, from Hertfordshire.
In December, Smethurst stated in a submission regarding UK traders made by his legal professionals to the Hanover prosecutor’s office that the firm collected an extra €100m from traders in 2019, regardless that its complete liabilities of €1bn, together with €800m put in by traders, exceeded the €700m worth of its properties on the finish of 2018. He described this as a “big mistake”.
The submission added that the property within the land register had been now not enough to safe all investments, and “this was not transparently disclosed … Investors were deceived about this by our client and people involved.”
It added: “From today’s perspective, our client deeply regrets this situation and accepts responsibility for it. Even though our client realised at the time that investors no longer had sufficient security, he still had a strong hope that the investments could be recouped.” This was first reported by Business Insider.
Justus von Buchwaldt, the insolvency administrator appointed by the Bremen district courtroom, expects insolvency proceedings for DC 80 – the funding car into which many of the UK traders put their money – to start in March or April. However, it is prone to take years to completely kind out.
Von Buchwaldt says there’s a “big discrepancy” between the €1bn-plus that the firm collected from traders and the €100m that would probably be raised from the sale of its remaining properties. “Where is the remaining €900m?”
The consultancy EY has additionally been drafted in, and its forensic investigators stated in an interim report in September: “It is possible that various offences from accounting fraud and tax offences to embezzlement and fraud offences have been committed.”
Boyle expresses sympathy with traders who’ve lost money, telling the Guardian: “There’s nobody angrier than me about people potentially losing their money. I understand why some people should never have been in this investment.”
Boyle additionally says he was not employed by Dolphin or GPG, that his company was outsourced to take calls as “client relations”, and that he had no information of what was occurring. He distanced himself from GPG and Smethurst. “I had no say-so in board meetings or what was issued out to investors … I didn’t attend financial meetings.”
He says he’s nonetheless attempting to assist traders within the UK, Korea and Singapore recoup their money.
Lawyers for Smethurst say they’re presently limiting themselves to answering the Hanover public prosecutor’s questions and so don’t make any exterior feedback presently.
Feist has filed complaints in opposition to GPG with the UK’s Serious Fraud Office and Action Fraud, and the German monetary regulator, BaFin.
The GPG creditors group represents greater than 1,700 UK traders. It has compiled a file on the company that has been despatched to shut to 200 MPs. The group is asking for a proper investigation by the FCA and motion in opposition to the introducers who, it claims, pocketed hefty charges with out doing due diligence on Dolphin.
An FCA spokesperson says: “German Property Group (GPG/Dolphin Capital/Dolphin Trust/Red Rock) is a German company and is not authorised by the FCA. However, we are aware that a number of UK consumers may have invested in GPG either directly or via a self-invested personal pension scheme (SIPP) or small self-administered scheme (SASS).
“If you did, you should immediately contact the firm that advised you to invest in GPG or your SIPP operator. If you are unhappy with their response you can ask the Financial Ombudsman Service to investigate and decide whether you are eligible for compensation.
“If the adviser or SIPP operator has gone out of business, you should instead contact the Financial Services Compensation Scheme.
“We are also aware that a number of investors have been targeted by a potential scam that asks them to transfer more money in order to recoup their original investments.
“These should be treated with extreme caution and we urge investors to ignore any such contact. Any money you send in response to such an approach is likely to be lost forever.”