Winding up petition for Dodgy Diamond Dealer

Reco Commodities LLP, a limited liability partnership that sold diamonds to members of the public as an investment opportunity, has been wound up by the High Court. The company had been handed a winding-up petition for making numerous false claims and failing to purchase diamonds that investors had already paid for.

The winding-up petition was presented under the Insolvency Act 1986 on 19 December 2014. The subsequent compulsory liquidation of the company was completed on 4 March 2015.

A litany of false claims

The Insolvency Service investigation into Reco Commodities revealed that the company, which traded out of premises at 18 King William Street, London, had made a series of false claims as part of high-pressure sales tactics. The claims were made by the company’s sales team to coerce prospective investors into making a purchase. Similar claims were also made on the company’s website. This included:

– A spurious trading history which claimed the company had been in operation for over 15 years, and in that time had dealt with more than 2,000 investors who regularly traded with Reco Commodities.

– False credentials given to members of staff claiming that senior brokers and the company’s founder had over 50 years of experience in the alternative investment and diamond industry.

– Claims that diamonds were sourced from the international market on a client-by-client basis, and not simply stockpiled. In reality, neither was true.

– Once purchased, all diamonds would be assigned to an account in the secure company vault in Hatton Garden, where they would be kept on the customers’ behalf.

– Phony claims regarding the investors’ prospective returns were also made. One sales agent claimed that returns of over 500 percent could be made in eight years.

But in reality…

Despite the company’s grandiose claims, the Insolvency Service’s investigation revealed that the reality of the service offered by Reco Commodities was not quite so dazzling. In fact, the investigation found that the company, which had supposedly been trading for 15 years, was only incorporated in August 2013. And, rather than 2,000 regular customers, the company actually had fewer than 30 investors.

Furthermore, rather than purchasing its diamonds from the international market, the diamonds the company did purchase for its customers were bought from retail outlets. There was also no secure storage facility, and no evidence to support the returns that were claimed.

When investigators contacted a number of the company’s clients, only one had actually received the diamonds they had paid for. Another, who had visited Reco Commodities premises, said they were “horrified to find a room full of screaming eighteen-year-olds… like a boiler room.” The other customers had either received only part of their investment or nothing at all.

During its brief period of trading before the winding-up petition was served and the compulsory liquidation took place, the company had received in excess of £450,000 from investors, including £27,000 paid to a supposedly charitable project.

Outlandish claims it could not fulfil

Commenting on the court’s decision to wind-up the company, David Hill, a chief investigator with the Insolvency Service, said: “This formally brings to a halt a disreputable business carried on by a company which lured investors with outlandish claims it seemingly had no way of fulfilling.

“The Insolvency Service will investigate and bring to a halt activities of companies that behave in this way and that are found to be operating against the public interest.”

In forcing the company liquidation in the public interest, Registrar Jones also found that there was a lack of transparency and a complete disregard for the Insolvency Service investigation.

It is worth remembering a limited liability partnership is treated the same as a limited company when it comes to insolvency matters so the ‘members’ can be presented with a winding up petition.The penalties are still the same too and this should be born in mind if your ‘partnership’ is insolvent and you decide to carry on trading.

To discuss your limited liability partnerships insolvency in confidence call 08000 746 757.

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