Two rare earth elements trading companies, Denver Trading AG, a Swiss registered company, and Denver Trading Ltd, registered in the Seychelles, have been wound-up following an investigation by the High Court.
While in operation, the companies acted as suppliers of 17 related metals increasingly used in the manufacture of electronics. The metals were sold to members of the public through a complex network of over 40 UK based sales agents, each receiving between 40 and 50 percent commission.
A number of these sales agents, including Westpier Consultants Limited and Global Metal Exchange Limited, have themselves been subject to winding-up proceedings following Insolvency Service investigations.
Misrepresentations of potential returns
The investigation found that sales agents were guilty of making serious misrepresentations of the potential returns UK investors could expect as purchasers of the rare earth elements. There were also a number of false and misleading statements present on the Denver Trading AG website relating to the standing and expertise of the company.
The investigation also shed light on the colossal mark ups sales agents had been authorised to apply. Sales agents for the Denver Trading companies were authorised to sell the metals to the public at prices ranging from 300 to 500 percent more than the prices the companies had paid. However, in practice, sales agents were commonly selling the elements for a 625 percent mark up.
Services designed to fleece vulnerable investors
In response to the court’s decision to wind-up the companies, David Hill, a chief investigator for the Insolvency Service, said: “In spite of their grandiose claims, this company’s services were simply designed to fleece vulnerable investors.
“Investors need to be wary: if you are cold-called and pressured to invest in any kind of investment, just hang up. No genuine investments would ever be conducted in such a manner.
“The Insolvency Service will continue to take robust action whenever serious failings are discovered and in particular against contemptible companies as in this case”.
The findings of Companies Court
Sitting in Companies Court, Registrar Barber found the companies had been arranged in such a way to intentionally mask the identity of the individuals at the top of the chain of command. However, the court identified those in control of the companies as Tobias Alexander Ridpath and Christopher John Sabin, neither of whom had ever been appointed as directors.
It was hardly surprising Ridpath and Sabin had gone to such lengths to hide their identities, given a previous nine year disqualification that had been handed to Mr Ridpath in 2000. By operating companies which were registered abroad, they thought they would be able to avoid any scrutiny.
£6 million turnover in just 15 months
Such was the success of the scam that the Denver Trading companies were able to generate a combined turnover of £6 million in just 15 months, starting in early 2012. However, the affairs of the companies were intermingled to such an extent that their trading activities could not be separated by the investigators.
Those who invested in the scam were told the rare earth elements they had purchased would be held in a bonded warehouse for five years, with storage and insurance costs paid by the trading companies for that period. Perhaps unsurprisingly, this information was false. The companies ceased to pay storage and insurance costs in 2013.
To make matters worse, the purchasers have not been able to access their investments as the storage contract existed between the storage providers and Denver Trading companies.
The two companies are now subject to an ongoing investigation by Devon and Cornwall police.
Written by: Mike Smith