The R2i alleged investment fraud involved numerous investment schemes that were marketed and sold to largely UK retail consumers from 2004 until 2013 when R2i was placed into liquidation.
The bulk of these alleged fraudulent investment schemes failed leaving investors with significant financial losses.
It is estimated the losses could be as high as EUR 250m.
Investors have accumulated a huge amount of evidence and intelligence of serious economic crime which have been passed across to various Government Agencies and Regulators over the years.
However, no appropriate action has been taken so the perpetrators have still not been held to account and funds have not been recovered from those involved in the deception.
R2i remains in liquidation but the liquidation is unfunded so there were limited resources available to investigate the directors’ conduct and R2i’s activities.
The original liquidators, who appeared to turn a blind-eye to the obvious irregularities and highly suspicious transactions, were replaced in 2018 so that there could be a full and proper investigation.
The problem is that commercial interests invariably override the public interest, which would bring the perpetrators to account and those who facilitated this very serious economic crime.
Failed investments were blamed on a developer and a Ponzi style replacement was offered. A large amount of funds remains unaccounted for or have simply disappeared, other funds went off to the directors and associates to fund their lifestyles with little or no justification and large volumes of funds were transferred across numerous R2i accounts so that the audit trail was disguised. Consequently, many R2i retail investors now face significant financial loss.
Evidence of serious alleged fraud involving R2i and its Directors
The investors identified compelling evidence of serious irregularities and serious alleged fraud which, in their view, is beyond any reasonable doubt. Examples included property investment fraud, fraud by false representation, fraud by failure to disclose information, ponzi scheme fraud, misappropriation of funds, forged signatures, filing false and misleading financial statements including potential tax fraud, fraud by abuse of position, fraudulent breach of fiduciary duty, escrow account fraud, simple fraud and unexplained disappearance of funds from bank accounts.
Status of the Valle de Uco Investment project
There remains a US$11m black hole representing the difference between funds raised from investors (US$13.2m) and the cost of the land (US$2.2m). There is very little to show for this US$11m, if anything.
Furthermore, the Argentine company directors (“VdURS SA”) left serious legacy issues which have cost the investors over US$0.2m to date not to mention the huge amount of time and emotional energy required to resolve these matters. The badly maintained piece of land still has some embargoes and is occupied unlawfully by a former employee who is trying to claim adverse possession.
Current Status and Scope of Investigations carried out by Government Agencies, Regulators and Regulated Entities
FCA:
The FCA had knowledge of serious alleged fraud involving R2i and its directors linked to the Jersey fund scandal back in 2006. Furthermore, the R2i Action Group set up by Jersey Fund investors sent over detailed submissions to the FCA from 2010 onwards setting out the serious irregularities that had taken place.
The repeated failure by the FCA to take any action culminated in a letter dated May 2014 to the then FCA CEO, Martin Wheatley. The FCA has a regulatory responsibility to protect retail consumers and reduce financial crime risk caused by unscrupulous individuals involved in unlawful and fraudulent activities.
The failure by the FCA to take appropriate action on a timely basis allowed R2i and the Crossicks to continue with raising funds by deception and market the Valle de Uco investment scheme (2008-2013) which resulted in significant and avoidable financial loss for the investors. Many R2i Valle de Uco investors filed complaints with the FCA for serious regulatory failurexi which has been validated by Dame Gloster’s damning report into the way the FCA regulated London Capital & Finance (LCF).
Both R2i and LCF share common characteristics with the main ones being a failure to take action when warned about serious fraud allegations and a failure to assess a business on a holistic basis or investigate the root cause.
In recent weeks, the Blackmore bond scandal, which also has stark similarities to the R2i scandal, was covered in a Panorama programme.
Both R2i and Blackmore were unauthorised, both were conducting regulated activity in the UK through boiler rooms, both wilfully misrepresented the product in their marketing, both failed to comply with the stringent checks required under the financial promotion rules, both laundered investor monies into bank accounts controlled by the fraudulent directors and both were reported to the FCA quite early and before millions of investor funds were allegedly misappropriated by the fraudulent directors.
Banks:
Apart from the alleged investment fraud itself, the economic crime was facilitated by various regulated entities such as financial institutions that operated the R2i and Valle de Uco Resort & Spa (UK) Limited (“VdURS UK”) bank accounts. US$10.1m and US$2.1m of investor funds were transferred to R2i and VdURS UK bank accounts respectively.
Barclays had knowledge of the serious fraud allegations in their capacity as replacement Jersey trustee in 2006 and yet Barclays continued to provide banking services to R2i and open up new bank accounts so that R2i could continue to deceive investors with the Valle de Uco investment scheme.
Bank statement evidence received by investors in 2017 showed significant sums being channelled into the R2i and VdURS UK bank accounts by retail consumers, the rapid dissipation of those sums to R2i, the Crossicks and their associates and other highly suspicious transactions.
The R2i Valle de Uco investors filed complaints against Barclays and HSBC in 2017 soon after they received bank statement evidence.
R2i Liquidators:
The R2i liquidators have been in office since May 2013 but the investigation was compromised due to all the funds being dissipated by the Directors.
Furthermore, the first office holders failed to engage with investors at the start of the liquidation despite numerous red flags and overwhelming evidence of serious irregularities. There were a number of claims that should have been explored against the directors and others associated with the alleged ponzi land-banking scam such as the associates, the banks that facilitated the crime and the accountants who presumably turned a blind eye.
Furthermore, the Fraud and other Government Agencies relied on representations by the first office holders rather than consider the extensive investigations carried out by the investors that proved alleged and serious fraud. The investors also provided a detailed brief and other information to facilitate investigation when Griffins were appointed.
We also believe Griffins was hampered by the lack of funds so progress was very slow. After discussing a contingency fee-based claim with their lawyer, Griffins concluded it was not commercially viable to progress the claim.
In early May 2022, Griffins agreed to make the books and records available to the investors so they could explore other potential recovery options. To date the investors have not yet received the books and records but they have been promised by the middle of October.
Fraud Agencies:
The fraud agencies and police (Serious Fraud Office, Action Fraud, National Fraud Intelligence Bureau, Sussex police) have not engaged with the R2i investors who had collated overwhelming evidence of the serious financial crime but instead passed the buck between the various agencies and simply relied on representations made by the R2i liquidators who had not conducted a full and proper investigation. Sussex police closed the case due to lack of funding. The R2i victims have been badly let down by all the above. There has been a serious miscarriage of justice
Putting the Matter Right
In conclusion, serious economic crime has been committed for which we have overwhelming evidence.
We know that the FCA and Barclays had knowledge of serious alleged fraud allegations before the Valle de Uco scheme was even marketed but no tangible or effective action was taken. Instead, it would appear the various Government Agencies, Regulators and Regulated Entities have made every possible effort to cover-up the financial crime and sweep it under the carpet.
The investors would argue that dishonestly covering up a crime is almost as bad as the underlying crime.
There have been numerous delays and there has been a fundamental failure to engage with the victims who have the detailed evidence and numerous witness statements which could be used to hold the perpetrators to account.
Furthermore, the serious economic crime could not have been committed without the facilitation of regulated entities such as banks, law firms and accountants.
These alleged fraudulent investment schemes have had a serious impact on the financial, emotional and physical well-being of many retail consumers. The R2i Valle de Uco investors believe that financial redress should be forthcoming from the perpetrators of the crime and those complicit with the crime.
The case highlights the need to improve engagement with victims on fraud cases especially those who have extensive knowledge and insight into the criminal activities and consequently reform the fraud agencies as well as the insolvency profession to achieve better outcomes for victims and worse outcomes for alleged fraudsters.