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Green collar crime: Prison sentences for two men behind a UK carbon credit boiler room scam

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Green collar crimeOn 18 April 2013, in case number T20127038 at Kingston Crown Court, Ian David Macdonald and David John Downes became the first people to be sentenced to prison for their role in a carbon credit boiler room scam. They defrauded UK “investors” out of a total of US$9 million. Macdonald was sentenced to eight years and Downes to four and a half years.

Macdonald and Downes systematically cold called people, many of them elderly, and pressured them into buying voluntary carbon credits and shares. They marketed the carbon credits and shares as highly profitable investments. On its website, the City of London police described the “investments” as “almost or completely worthless”.

The scam took place between January 2007 and December 2010. The biggest individual loss was US$600,000. Hundreds of people paid millions of dollars into MacDonald’s Canadian and US bank accounts. Essex Police and the National Fraud Intelligence Bureau alerted the City of London Police to these transactions.

In November 2010, when Macdonald and Downes asked their bank to wire US$1 million to a Swiss company, the British Columbia Securities Commission blocked the transaction and froze the bank account, “due to suspicions over the origins of the funds”, according to the City of London Police.

One month later, the two men were arrested on suspicion of “fraud by false representation and money laundering” when they flew into Heathrow from Vancouver, on their way to Spain.

The City of London Police set up an investigation called “Operation Skijump” and wrote to 1,800 people they believe had been targeted by boiler room fraudsters. When the investigation’s phone lines opened, “we were full to capacity,” said PC Alison Youles who managed the call centre team. “In just two days we fielded 495 calls.”

The good news is that much of the money was recovered. In a statement, Detective Constable Claire Armson-Smith, from the City of London Police, said:

“Securing the first convictions and jail sentences for a carbon credit fraud is a landmark moment for the City of London Police, with two men who ruthlessly targeting the vulnerable being brought to justice and their criminal operation dismantled.
 
“Much of the money they stole and moved across the Atlantic has been recovered and will be returned to victims, helping them to move on from a very bad experience and sending a message to other fraudsters that they when we come for them we will come for their money as well.“

The police recommended that people who believed that they were victims of the fraud should contact Action Fraud (telephone number 0300 123 2040).

In its statement about the jail sentences, the City of London Police states that it “has been investigating a growing number of suspected carbon credit frauds, where environment investments are being marketed as a safe way to make easy money.”

People believe they are buying products that can be traded to companies in a legitimate market when the reality is these credits either do not exist or can only be bought and sold on a voluntary market at a fraction of their supposed value.

There are several lessons from this case:

  • The police operation took several years. In the end, however, it was successful and most of the money was returned to “investors”.
  • The financial regulatory authority in the UK played no role whatsoever. Voluntary carbon credits are not regulated.
  • The police encourage people who believe that they are victims of boiler room scams involving carbon credits to contact Action Fraud, which works with the National Fraud Intelligence Bureau and the City of London Police.
  • Buying voluntary carbon credits as an investment is extremely unlikely to make a return.

 

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17 Comments

  1. This is great news. Does anyone know if the UK Police have an investigation into 360 Investment group or Carbon Ex Sarl for the same sort of thing.

  2. Don’t know and I’m guessing the police wouldn’t publish this even if they were investigating. But the more people who contact Action Fraud over Carbon-ex the more likely they are to take action

  3. It is a great news and excellent first step to stop the operation many carbon cow boys around the world.

  4. Does anyone know how to get hold of the judge’s summary in such cases? This could be very useful in any potential legal action.

  5. Yes, Carbon Ex S.A.R.L. needs investigation too. I know many people who are victims and have lost fair bit of money–

  6. CO2 Markets who have gone into liquidation now fleeced hundreds of people and I know two that are 500k out of pocket. They have been reported to the Fraud Office but as far as I know, the police have not taken any action. How do we get the police to take action and prosecute?

  7. Hi, has anyone heard of Hamilton Carter? Is this just another recovery boiler room or are they genuine? I only ask because they claim to be dealing only in phase 3 green CERs and say they can sell my VERs alongside their next trade if I buy a small block of gCERs in oder to open a trading account with them.

  8. @apps – Thanks for this.

    Police action takes quite a long time. If you read the post above, the scam took place between January 2007 and December 2010, but Ian Macdonald and David Downes were only sentenced in April 2013.

  9. @doc – Thanks for this – I’m afraid Hamilton Carter (UK) Ltd looks like a recovery room. The company was registered in November 2012. The director, John Revell, is a marketing consultant, apparently with no previous experience in carbon markets.

    They are asking you to hand over more money. If Hamilton Carter can sell your VERs (which, frankly, is unlikely) why should they require you to buy more carbon credits?

    How did Hamilton Carter get in touch with you? How did they get your contact details?

    Hamilton Carter’s website includes Carbon Neutral Investment’s logo. The Financial Conduct Authority put out a warning about Carbon Neutral Investment:

    “Beware when an investment involves Carbon Neutral Investments,” warns the UK’s Financial Conduct Authority

  10. I have been contacted by Hamilton Carter and they need 3000 worth of cers to sell my carbon credits- they talk about an exchange, but another company Eliot Moore also say they can sell my credits to a larger company and bot state Nov 1st as settlement date and said Hc was a scam and could not belong to the exchange as it only accepts corporate clients and also 10 million pounds to be a member. are either of these genuine?

  11. I have been contacted by Hamilton Carter ltd today as they are interested in purchasing my original investment of 4000 CERs which I purchased from Carbon Ex on an allegedly approved scheme in India. They have asked me to aquire another 1500 gCERs in order that they can off load my original investment with Carbon Ex. Hamilton Carter have stated that they will provide me with a signed letter of Guarantee, stating that they will sell these freshly acquired gCERS in February along with my original 4000 VERs. Is this another scam or are these guys a legitimate company?

  12. @R Hodgson – It’s a Recovery Room scam. They contacted you – no respectable financial company would do that. See this post for details of what you can do (and what you shouldn’t do) if you’ve been scammed into buying carbon credits as investments: http://bit.ly/1at2RJa.

  13. I was called today by a Brian Carter from Novus Capital Markets concerning my carbon credits. He said that my detils had been passed from “Central Reservations” where details of holdings bought through companies now in liquidation are available to “regulated brokers” for sale and return of proceeds to the investor. He said they would evaluate my holding and then require a returnable payment of 20% of the valuation to cover verification, agency fees, and conversion of my VER and CERs to EUA. On sale of the holding they would charge the buyer 5% and return the proceeds to me along with my 20%. He claimed that EUAs were fetching £7-£15.
    I asked for the company FCA number but he gave me “his”, BCX01567, claiming that he had worked at HSBC. On checking the FCA register I found that there is a clone company with the same name.
    Can anyone advise on this Central Reservations operation? I guess it could be Central Registrations. I have heard someone from Oakmount use a similar term but have been unable to discover anything about it.
    Presumably I have been approached by the clone.

  14. @Fallguy – Thanks for this comment. It’s a recovery room scam. Novus Capital Markets cold called you. There is no Central Reservations or Central Registrations. There is no way of converting VERs and CERs to EUAs. The company wants an advanced fee (that you will never see again). And, as you point out Novus Capital Markets is cloning a real company. Please report all this to Action Fraud (telephone number 0300 123 2040).