Aggressive affiliate marketing and promises of over 14% returns have caused investors to lose approximately $30 million
Titled gentry are hardly the usual subject of failed online investment schemes that promise high returns and end up delivering nothing but empty bank accounts.
On the contrary, usually the carefully orchestrated schemes that bilk unsuspecting retail investors via affiliate marketing channels into unregulated entities that end up running away with the money instead of placing trades on a live market is usually associated with the back streets of concrete cities in the Eastern Mediterranean rather than the blue blood aristocracy of upper class British society.
There are, however, always exceptions and whilst the vast majority of professionals who have dedicated their entire careers toward constantly improving and innovating the direction of the electronic trading industry have been long since in favor of removing the affiliate-led island based lead churners from our industry, themselves marked out by their semi-literate prose and arrogant stance which has become the bete noire of the lower end of retail FX.
This time, however, a titled gentleman, himself a political peer, whose attire is recognizable across the United Kingdom as flamboyantly regal and in keeping with his cut-glass Queen’s English accentuation makes the contrast from the usual swaggering medallion men with their high decibel, guttural attempts at speaking English.
Along with his grandeur, the magnitude of the client losses are equally lofty.
75 year old Edward Timothy Razzall, also known as Lord Razzall, and in some cases Baron Razzall CBE, is a British Liberal Democrat politician and parliamentarian who goes by the nickname Lord Razzall of Dazzle due to his overtly aristocratic wardrobe, has managed to get himself involved.
This particular pseudo Ponzi scheme was similar to disgraced bond company London Capital and Finance, and goes by the name of MJS Capital, which was fronted by Lord Razzall himself.
MJS Capital offered high interest rates on savings which it promised would be invested in arbitrage trading positions, which in this case is a vague term generally meaning offsetting investments in one asset against another. MJS boss Shaun Prince had claimed the strategy was almost without risk.
The collapse of MJS Capital comes hard on the heels of the scandal of London Capital & Finance, where 11,700 largely elderly investors ploughed £237 million into bonds which are now almost worthless.
Businessman John Patrick Russell-Murphy helped set up MJS as a director in 2015 and, according to London Capital & Finance’s administrators, was also instrumental in connecting London Capital & Finance to its slick marketing partner, Surge. Mr Russell-Murphy resigned from MJS in 2016 and at the time, the London Evening Standard attempted to contact him with no joy.
Precise sums are yet to be established, but MJS is thought to have raised up to £30 million from the public, with many investors saying they were tempted by brochures featuring Lord Razzall’s endorsement as a founder director. The individuals’ investments vary, but range from a few thousand pounds to several hundreds of thousands. The bonds stopped paying quarterly interest to investors in around December 2017, with MJS citing difficulties with its banks that were delaying payments.
Despite reassurances to customers and a name-change last October to “Colarb Capital Plc” the company went bust. Liquidators are being appointed to try to recoup investors’ money. Like other MJS victims, bondholder McKay was asked by a Colarb executive in January to transfer his bonds to a new company called Colarb Capital 4. Frustrated by his experience with MJS, he declined.
Lord Razzall says he quit as a director of MJS in 2017 and had nothing to do with the company since then. However, he is named and lengthily lauded as one of the three key managers in the Colarb 4 investment memorandum dated October 2018 and company material has used his imagery continually.
Lord Razzall, according to British reports, claims that was a “serious misrepresentation”: “I’d never heard of it until you mentioned it,” he said. He also argued that only wealthy or sophisticated investors should have backed the original bonds.
Many investors started a search for low-risk investments online and came across ‘introducer websites’, which are basically affiliate sites that act as middlemen between mini-bond issuers and new clients, in the same way that certain affiliate marketers have got themselves such a bad name in the FX business. Their adverts appear at the top of search engine results when people type in trigger words like ‘investment’ and ‘safe’.
One website promoting MJS Capital bonds was Direct Property Investments and its sister website Safe Secure Investments. The latter has been offline since The Mail on Sunday warned about its promotions last year. These websites claimed to be able to provide ‘premium UK investments’ with returns of up to 14 per cent a year, ‘with multi-layered security structures for added peace of mind’.
MJS Capital was flagged as a ‘highly secure investment’. Clients were asked to fill in a form and send it back to the introducer to receive further detailed information, but were signing up as self-certified sophisticated or high net-worth investors.
Funds are still unaccounted for while the company is in liquidation, though there is an expectation investors may get some money back.
However, some people put their life savings into what they thought was a low-risk venture, but turned out to be a risky gamble meant only for high-net worth or financially sophisticated investors.
This demise and surrounding scandal has come to light at the same time as FinanceFeeds reports regarding the failure of bond company London Capital & Finance, in which tens of thousands of investors together face losses of more than £236 million and which also has political connections.
Lord Razzall denies that he was responsible for bondholders’ plight, he said: “I resigned as a director in 2017 and although it was suggested that I should become secretary in June 2018, I never accepted.” He is now chairing another high-risk investment prospect. Lawthority aims to finance court cases.
There are a series of this type of bond that have become available recently, one that visiors to restaurants in London may have seen is the Chilango Burrito Bond which also promises 8% interest, rather like that of MJS.
MJS, also promising 8% interest on its material, yet with its staff having made pie in the sky claims of 14% (!), declares itself: “A Brexit-proof investment”, and a “genuine ethical investment” for people to tuck into their ISA. So far, it has paid its investors their interest in full.