Victims sue Colemans’ insurers over decade-old Carbon-ex carbon credit investment scam

Carbon-ex is gone, Colemans is dissolved, and the carbon credits can't be traced

Twenty investors who lost their money after buying carbon credits as investments over a decade ago have filed a legal case against XL Insurance Company SE, the indemnity insurer of dissolved law firm Colemans-CTTS LLP.

Colemans-CTTS LLP was a UK firm of solicitors that was dissolved in July 2020. Between October 2010 and 2013, Colemans handled the contracts and payments for a company registered in the tax haven of Luxembourg called Carbon-ex S.à r.l.

Carbon-ex described itself on its website as “a wholesaler of carbon credits with the primary aim of assisting companies and individuals to offset their CO₂ emissions and mitigate the harmful effects of climate change”.

In reality, Carbon-ex was supplying cheap carbon credits to a network of boiler room scam companies that were selling the worthless credits as investments to members of the public. The companies involved included MH Carbon, 360 Invest, Carbon Expert, Alternative Markets, and the investors found out the hard way that the carbon credits were worthless as investments.

In 2016, one of the investors, a pensioner called Miriam, contacted REDD-Monitor. She sent a series of emails from 360 Invest, Carbon-ex, and Colemans. She asked me to publish her emails to “help others not to make the same mistake”.

The emails are posted here and here. They tell a depressing and frustrating story of a scam.

Aston Lloyd

In May 2018, two solicitors from Colemans appeared at a Solicitors Disciplinary Tribunal. Roger Coleman was Colemans’ senior partner until the firm was taken over by Simpson Millar in August 2015. Nigel Tarrant was a member at Colemans until 2015. Tarrant retired in December 2017.

The Solicitors Regulation Authority began investigating Colemans in August 2013 following complaints from people who had lost money to the carbon credit investment scams and on property investments run by a company called Aston Lloyd.

The transcript of the Solicitors Disciplinary Tribunal states that,

Between 2006 and 2010 Colemans acted for a number of Aston Lloyd companies in relation to 11 overseas property development / investment schemes marketed to individual investors in the UK.

Aston Lloyd took money from retail investors, but failed to complete the overseas developments and became insolvent. Aston Lloyd used a series of boiler room operations, including one called Emerald Knight, to sell its investments.

Emerald Knight was involved in promoting several investment scams to retail investors.

Carbon-ex

In October 2010, Colemans started acting for Carbon-ex, just three months after Aston Lloyd became insolvent. The transcript of the Solicitors Disciplinary Tribunal states that, “Colemans were introduced to Carbon-ex and its associated companies by Kulvir Virk.” Virk was a director at Aston Lloyd Holdings Limited.

The first meeting took place on 27 October 2010, when Coleman and Tarrant met Norbert Przibilla, a German who was director of Carbon-ex at the time.

Colemans agreed to act on behalf of Carbon-ex and on 3 November 2010, Tarrant sent an email to Przibilla in which he stated that he “should be ready to start processing deal tickets for you this afternoon to issue contracts tomorrow”.

The first trade took place on 11 November 2010.

During a November 2013 interview with the SRA, in response to a question from one of the SRA’s Forensic Investigation Officers about Colemans’ experience in conducting transactions relating to carbon credits, Tarrant replied,

“None of carbon trading. We had no experience and we made that very, very clear at the outset, but we learned fast, you know.”

The SRA, it seems, has even less grasp of carbon trading. Here’s how the Solicitors Disciplinary Tribunal describes a carbon credit:

A single “carbon credit” represents the volume of oxygen required to offset the equivalent of one tonne of tCO₂e emitted into the atmosphere.

In 2011, the Financial Services Authority warned about investment scams involving carbon credits. The Guardian reported on the warning in August 2011.

“Investors risk ending up with an overpriced credit which is virtually unsellable,” journalist Tony Levene wrote in The Guardian.

That is precisely what happened with the Carbon-ex scam.

Colemans received a total of £14,776,631.87 million into its client account from investors. More than 1,500 transactions were involved. One investor told the Solicitors Regulation Authority that the company selling the carbon credits had referred to Colemans’ involvement and the fact that the firm was regulated by the SRA.

On 2 November 2011, Olga Gille of Carbon-ex wrote to one of the investors stating that,

Carbon-ex is a commercial enterprise offering individuals and companies the facility to purchase wholesale VER’s and CRT’s within the carbon market. We have a clear structure in place using a UK based law firm (Colemans-ctts) regulated by the Solicitors Regulation Authority with full UK clearing as opposed to other companies which may be selling various types of credits for much lower than we do.

Gille sent a draft of this email to Tarrant who acknowledged receipt of the email. In an interview with the SRA, Tarrant said he did not notice this part of the email.

The transcript of the Solicitors Disciplinary Tribunal notes that,

[T]he use of solicitors’ involvement is a classic aspect of dubious investment schemes and a clear reason why solicitors must not become involved in schemes that they do not fully understand.

On 30 March 2013, Tarrant wrote to Qaisar Abbas of Carbon-ex, “setting out his concerns about the relationship between Colemans and Carbon-ex,” according to the transcript. (Coincidentally, REDD-Monitor wrote about Carbon-ex on 21 March 2013.)

By this time, Colemans had received several complaints from people who had bought Carbon-ex’s carbon credits. (Miriam wrote to Colemans on 3 March 2012, because she had sent several emails to Carbon-ex and received no reply. Colemans just copied the reply to Carbon-ex and wrote that they “should be able to assist you”.)

By May 2013, Colemans had terminated its retainer with Carbon-ex. Carbon-ex S.à r.l went into liquidation on 6 January 2014.

The Solicitors Disciplinary Tribunal found that Colemans had “stepped outside the scope of its expertise”. The Tribunal found that neither Coleman nor Tarrant “intended to breach any regulatory rule or principles, and there is no suggestion that either of them acted in any respect without integrity, probity and trustworthiness”.

Roger Coleman was fined £30,000, and Nigel Tarrant was suspended for three years. They also had to pay costs of £135,000.

The victims of the Carbon-ex carbon credit scams got nothing.

Investors sue XL Insurance

This week, Law360 reported that twenty investors are suing XL Insurance Company SE, Colemans’ indemnity insurer. The claim filed in the High Court on 24 May 2023 argues that XL Insurance should pay £1.4 million in damages for the misrepresentations that Colemans made, which led the investors getting involved in Carbon-ex’s scheme.

The claim states that,

If each investor had understood that they were transferring money to Colemans for carbon credits/gCERs that they would never be able to trace, locate or deal with, the investors would not have entered into the transactions.

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