Fraudulent activity through limited companies takes on many guises. On 27th October, the Insolvency Service published details of two cases that have resulted in the companies involved being wound up by the Hight Court. The cases are very different. One saw the fraudulent company scam its suppliers by purchasing goods on credit without ever paying for them. The other was part of a global cryptocurrency investment scam.
Nobleread Ltd, trading as NB Construction and NB Wholesale, created fake directors through identity theft and used those profiles to apply for credit with construction goods suppliers. From February to April 2021, the company ordered building materials, vacuum cleaners, boilers, microwaves and other goods using their credit facility with suppliers.
The goods were then sold on at a reduced price for cash, with the company’s representatives approaching people on construction sites and at builders’ merchants. The Insolvency Service reports that, “in most cases goods were shipped directly to site by the trade supplier.” NB Construction would then collect the cash payment in person. The company also had goods delivered to a warehouse in Essex under their NB Wholesale brand.
Nobleread Ltd’s suppliers were left more than £60,000 out of pocket, when the company failed to pay its debts.
Mark George, Chief Investigator at the Insolvency Service, said: “Nobleread has gone about its business in a reprehensible manner and those behind it have gone to great lengths to hide their identities. Suppliers should always do due diligence on companies before agreeing any credit facilities, and check the integrity of any trade references in particular.”
PGI Global UK Ltd is part of the Praetorian Group International Trading Inc., which has been subject to a seizure warrant in the US.
PGI appears to have been involved, mainly, in the sale and purchase of cryptocurrency. The company promised investors “returns of up to 200%, but these never materialised and “investors were unable to withdraw the funds they had invested.”
Between July 2020 and February 2021, the company received over £600,000 from investors. Outgoings from PGI’s accounts included nearly £200,000 paid to personal accounts and “a £10,000 payment to a luxury department store.”
The sole director of PGI Global UK Ltd refused to cooperate with the Insolvency Service’s investigation.
Mark George said: “Individuals and businesses that operate under the protections afforded by limited liability are, as a consequence, required to comply with the requirements of the Companies Act. This case highlights that where we have reasonable concerns about the trading practices of a company the court will take a dim view of any failure to co-operate with a statutory enquiry…”
Both companies were wound up by the High Court, with the court agreeing that closing down the companies was in the public interest. In the case of PGI Global UK Ltd, the court also cited the company’s “trading with a lack of commercial probity, and failure to comply with statutory obligations and lacking transparency.” Nobleread Ltd was described as following “objectionable trading practices.”
In both cases, the Official Receiver has been appointed liquidator and will look to recover funds for creditors.
Sadly, we saw an increase in scams at the height of the Covid pandemic, as fraudsters took advantage of others’ vulnerability. Many businesses and investors focused on survival or maximising investments, rather than completing due diligence exercises – and the fraudsters capitalised.
At ESA Risk, as part of our fraud consultancy, we can perform initial due diligence on suppliers / business partnerships / investment companies, or help to trace assets and funds if these have been fraudulently stolen.