“Returns up to 895%” and other misleading statements from Property Frontiers about investments in EcoPlanet Bamboo and Silva Tree

Property Frontiers is an Oxford-based investment firm. According to the company’s website, Property Frontiers is “an investment company with a reputation for offering the best-performing international property and alternative investments to both first time and experienced investors”.

One of the alternative investments that Property Frontiers promoted was EcoPlanet Bamboo’s plantations in Nicaragua. Property Frontiers told anyone who would listen that the returns would be huge. But it seemed almost like Property Frontiers was just making the numbers up. Here’s a selection:

• In May 2011, Property Frontiers organised an investment seminar at the Hilton Metropole in London. A flyer for seminar promised returns of 895%.

• In July 2011, the Oxford Mail ran a short piece that included comments from David Cox, then-director of Property Frontiers. “The bonds will allow people to invest at least £10,300 in the hope of obtaining a return of 503 per cent over 15 years,” according to the article.

• In 2012, EcoPlanet Bamboo promised a 500% return over a 15 year period on an investment of US$50,000.

• In November 2012, Ray Withers, chief executive and co-founder of Property Frontiers, asked his employee George Houlbrooke why he had invested in EcoPlanet Bamboo’s plantations. Houlbrooke replied,

  Well obviously not many people would call 600%+ ROI over 15 years a bad return and as an income generator you don’t really get much better than this.

• By January 2013, the predicted return had fallen by more than half. Withers wrote on the company’s website that,

  The plantation lots in Central America are available on 15 year commercial leases from as little as $55,000 with 26% base case annualised returns. Realistic market returns are forecast to be considerably higher, at 293% or more over the 15 year term.

It all sounds too good to be true, doesn’t it?

In a series of posts on REDD-Monitor over the past few months, I’ve documented the unravelling of this investment.

And on 1 February 2017, Adrian Derbyshire wrote about the fund behind the investment, Premier Group (Isle of Man) Ltd on the Isle of Man Today website. The headline is “Savers lose millions as funds collapse”, and the article ends with this advice:

Michael Weldon of the FSA said that any investor who felt they had been mis-sold investments should consider making a formal complaint to their financial adviser.

“Help Save The World With Carbon Offsets, Says Property Frontiers”

Back in 2009, Property Frontiers was pushing investments in a carbon offsetting scheme in Costa Rica. Here’s the start of one post on the company’s website:

If you ever wanted to be a superhero and save the planet, now’s your chance to act cool and slow down global warming with carbon offsetting, according to property investment consultancy Property Frontiers.

And here’s Withers telling us how the deal works:

In the case of Property Frontiers the product is a SIPP approved strip of land in the Costa Rican rainforest. The minimum investment of $12,000 buys a strip worth 200 carbon credits. British families output 18 metric tonnes of greenhouse gasses per year on average, which would leave 182 carbon credits to sell each year.

Property Frontiers put out an Investment Prospectus about the investment. Ben Jefferis, Sourcing Manager at Property Frontiers described the scheme as a “stable and sustainable investment”. He forecast returns of 16.6% per year.

The prospectus is full of the same sort of arguments in favour of buying carbon credits as investments that many boiler room scam companies used to persuade people to part with their cash:

The credit prices are expected to increase steadily according to market trends, thus your annual return should increase year on year.

“Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market over all” – Barclays Capital

Property Frontiers tells us that the return on carbon credits will be 7.5% per year.

“Example returns at 20 years: 180 credits have yielded net $77,948.43. Land could then be sold at $70,112 assuming it is sold at 10% yield. Potential profit for initial $12,790 investment is: $135,279.43.”

Property Frontiers give figures for the price of carbon credits for the next 40 years. I’ve plotted the figures on a graph (years along the x-axis and the value of the carbon credits in pounds on the y-axis):

Sounds too good to be true, doesn’t it?

Red flags

This graph reminds me of a very useful post by David Marchant on OffshoreAlert. The post is titled “How to Identify Red Flags in Investment Schemes”, and it starts as follows:

As an investigative reporter, the easiest financial crime for me to detect is a Ponzi scheme. Any investment scheme with a performance chart that is essentially a diagonal line trending upwards with little or no meaningful variation over many months is a Ponzi scheme and, as such, doomed to failure.

The level of returns do not meaningfully fluctuate because they are not related to profits or losses from any underlying business activity, as is the case with legitimate enterprises, but are paid from new money coming into the scheme. When the level of new investments inevitably drops below the amount needed to meet redemptions, operating costs, and pay-outs to insiders, it collapses.

When conducting due diligence, it doesn’t matter who is behind such a scheme. The names and professional backgrounds of management and directors are irrelevant and it is of no consequence if they don’t show up in your KYC database(s). A diagonal line equals fraud, end of story.

Of course, Property Frontiers’ ever increasing carbon credit values don’t give a diagonal line. Instead, Property Frontiers wanted potential investors to believe that carbon credit prices would increase exponentially. For at least the next 40 years. Clearly this is nonsense.

The reality is that the price of voluntary carbon credits has fallen since 2009. In 2015 the average price of a voluntary carbon credit hit an all time low of US$3.3. And there is no secondary market for voluntary carbon credits.

Here’s what the unfortunate people who invested in this scam received:

Of course it’s not worth the paper its printed on. Silva Tree, the project developer, has appeared twice on REDD-Monitor:

As Dutch journalist Okke Ornstein points out again and again on his blog Bananama Republic, Silva Tree was a scam.

The investment involved another one of REDD-Monitor’s regulars: Citadel Trustees.

Citadel Trustees was lurking in the background of a series of UK investment scams involving sales of carbon credits as investments. In the Costa Rica investment scheme, Citadel Trustees held the lease on the land, according to Property Frontiers’ Investment Prospectus.

On 1 April 2014, Citadel Trustees changed its name to Highpoint Trustees. It is now in liquidation.

Property Frontiers also promoted investments in Silva Tree’s Paulownia plantations in Panama.

Returns up to 895%!

Here’s screenshot of the flyer that Property Investmets put out to attract potential investors to its Bamboo Investment Seminar in 2011:

In his post about red flags and investment schemes, David Marchant writes,

When evaluating the credibility of an investment product, it is important to understand that, even in good-faith schemes, anyone who solicits money from third-parties does not know whether an investment will grow, shrink or disappear. If they had a sure thing, they would put their own money into it and not solicit funds from others. All projected and simulated returns are worthless and their inclusion on marketing material is a red flag.