Eventus Alternatives: Another carbon credit boiler room scam?

Eventus Alternatives is a Dubai-based company selling carbon credits to individuals as investments. Carbon, according to the company’s website is, “The dawn of a new commodity – the booming new alternative providing comprehensive return on investment.”

The company cold calls people and tells them that by investing in voluntary carbon credits they will achieve 30% annual profits. It claims to be “the fastest growing business in the Middle East within the Emissions sector”. Eventus Alternatives employs more than 20 sales and financial professionals and is looking to expand.

Eventus Alternatives job adverts suggest that this is a boiler room operation: “You will be expected to manage existing clients and attract new clients via telesales.” Among the skills Eventus Alternatives is looking for in an employee include:

• Telephones sales experience is necessary

• Experience within a sales/ brokerage environment

• The ability to adapt your sales style to the client

A company brochure, available for download here (pdf file, 2.1 MB), explains that Eventus Alternatives is part of a group of companies:

Eventus Alternatives Commercial Broker LLC is incorporated in Dubai and holds a valid commercial broker license to trade in carbon credits. The websites for Eventus Wealth and Eventus Capital provide little information about the companies.

Currency Index is a UK-registered company. According to his LinkedIn page, Neel Gondhia has been working simultaneously as Senior Portfolio Manager at Eventus Alternatives and Regional Manager at Currency Index since May 2012.

Eventus Alternatives makes what appear to be very misleading claims about the price of voluntary carbon credits in its brochure. First, it conflates compliance credits with voluntary credits. The brochure states that,

Eventus Alternatives does not explain that neither countries nor corporations will buy voluntary carbon credits to meet emission limits. Or that the price of compliance carbon credits has been falling since 2008.

On its website, Eventus Alternatives confuses compliance and voluntary carbon credits:

With the enormous number of initiatives being put into place from international and regional bodies to reduce carbon emissions, the value of carbon credit has to increase exponentially, after all how many other commodities have their own UN backed protocol to increase their implementation.

Eventus Alternatives sells voluntary carbon credits. The average price of voluntary carbon credits was US$6.20 in 2011 and fell to US$5.90 in 2012. Nevertheless, Eventus Alternatives’ brochure includes this graph, indicating that the price of “carbon credits” increased from September 2011 to November 2012:

Eventus Alternatives gives no source for the prices in this graph. The numbers given in the table are different to those obtained by reading from the graph. For example, reading the graph, the average price in September 2012 is about US$8.6. The number given in the table for the same month is US$9.51.

In fact, there is a wide range of prices of voluntary carbon credits, depending on the type of project involved and how long ago the reduction in emissions was made. Carbon credits from an HFC-23 industrial gas project in China, for example, are very cheap, whereas credits from a wood-burning stove project in Africa would be more expensive. However, Eventus Alternatives does not explain what type of carbon credit is shown on its graph.

The company brochure includes a table under the headline “Projections – Examples of returns”. Eventus Alternatives explains that this is “an example of returns shown to one of our client over a 12 month period [sic] from August 2011 until September 2012”. It suggests large profits can be made – but again there are no details and none of the figures can be checked. The figures given are different to those in the graph and table above.

In April 2013, the Financial Conduct Authority issued a warning stating that Eventus Alternatives and three other companies are not authorised under the Financial Services and Markets Act 2000. Eventus hired a legal firm to communicate with the FCA and to revise Eventus Alternative’s materials. The warning was removed from the FCA website on 2 May 2013 and the FCA has confirmed that it is satisfied that Eventus is not engaged in any regulated activities in breach of the FSMA. Voluntary carbon credits are not regulated in either the UK or the United Arab Emirates.

The company’s website was registered in January 2012, by Phil Wombwell. According to his LinkedIn page, Wombwell has been CEO of Eventus since March 2010. Before that, he worked for nine months as a Senior Investment Manager at Barclays, Abu Dhabi, and before that he was at Eventus Capital.

On its website, Eventus Alternatives explains the importance of having an exit strategy:

If you choose to us our services, you will not have to worry about trading your carbon credits on international exchanges by yourself. Our experienced portfolio managers will guide you through the benefits of investing in VER credits and why these specific credits will help maximize your return, and also help you exit when the time is right.

The following are extracts from Eventus Alternatives’ Terms and Conditions:

• Eventus Alternatives does not guarantee being able to match Clients with Purchasers within a given time period.

• Eventus Alternatives does not agree to purchase carbon from any Clients.

And here is the risk warning:

• Any prices mentioned for carbon credits are indicative only. Carbon credit prices can go down as well as up.

• It is important to understand that trading of carbon credits involves risks. You may get less back then your total outlay, and in extreme case may get nothing back at all. Any suggested growth is a projection only and cannot be guaranteed, and nothing expressed or implied should be taken as a forecast of future performance.

• The purchase of VERs could be regarded as risky and speculative in nature.

• It may be difficult for you to obtain true market prices for VER carbon credits, as many are traded “over the counter” and as such values may vary. The “market price” displayed by Eventus on the Website is the over the counter price indicated by Eventus and should not be regarded as a price generally available from third parties in connection with the sale or purchase of VERs.

• You should never purchase more carbon credits than you can reasonably afford to do so.

• Customers should be aware there is little or no liquidity and in some cases and it may not be possible to sell the Carbon Credits without suffering a loss of some or all of the capital invested.

• The Client should not enter into the Agreement unless the Client understands the nature of the transactions envisaged under the Agreement and the extent of the Client’s exposure to risk. The Client should be satisfied that the transactions are suitable for the Client in light of the Client’s financial circumstances and position. The Client can consider seeking advice from an appropriately qualified adviser.

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UPDATE – 26 June 2013: Post edited as follows: clarification that Eventus is licensed by the Department of Economic Development in Dubai. The paragraph about the withdrawal of the FCA warning has been re-written. Comments about the Terms and Conditions have been deleted.

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