Wednesday, 4 April 2018

DW Clothing collapse throws up some interesting patterns.



This story is long and painful. It involves Crowdcube, Envestors, various defunct companies, Nepal, an accountant and some very dodgy numbers. It is rotten to the core. Are you sitting comfortably? Then.........


First things first - we wrote about this crew twice here, warning people. So investors have no excuses.

We start in 2006 in Nepal. David Kishan Hathiramani had an idea to make suits for Londoners using tailors in Kathmandu. He set up ASTF Ltd. They traded quite well for 2/3 years and began looking at taking on pop up fittings centres. The crash in 2008 was where it all started to go wrong.

Skipping on, according to the liquidators for ASTF Ltd, they had failed to pay HMRC over a lengthy period of time and by 2012 owed them large sums of money for Corporation Tax, PAYE and VAT. A monthly payment scheme was agreed but ASTF failed to adhere to it. In 2012 the company filed large losses. In some mad attempt to rid himself of these debts, David declared that the accounts for 2011/12 were be re presented. The company told HMRC that this would remove £29k off their bill. Well quite obviously HMRC saw that one coming and proceeded against the company for full recovery. Then RBS stepped in.

To cut a long story short, ASTF went bust owing HMRC and RBS large sums but also owing large sums to creditors. It was a mess. 

Round about 2012 ASTF used the services of an accountant, Keith Watson. Now it turns out that Watson was in the market for a failed company and was the only offer the administration for ASTF received. He paid a few thousand pounds for the business. Keith we will meet again. 

So when you read in the Crowdcube 2015 pitch that David and his team had almost bravely saved the business by restructuring it in 2012, you know you are dealing with some degree of bullshit. ASTF was appallingly badly managed. Full stop. It then tried to hoodwink HMRC in plain sight. End of. It wasnt restructured so much as pre packed by pouring all the broken bits into a bin liner and handing them to Keith Watson's newly incorporated DW Clothing. 

So back to 2015 and Crowdcube. Keith Watson - the new owner of DW Clothing which now owned ASTF's assets decides to Crowdfund. They select Crowdcube. 

Was there a reason for choosing equity crowdfunding and Crowdcube?

We think so. Easy money. Now for a short detour............

If you delve into the world of Keith John Watson there are clues.

Most of you will remember the failed Front Up and Front Up Retail. The latter funded three times on Crowdcube in 2012/13 taking £227k off punters before crashing out. Well Keith Watson was a director and SH of both companies. We wrote a lot about this outfit, we felt they were being less than honest with investors and that Crowdcube had failed to warn people. Does that ring any bells? Between them, they went down owing creditors in excess of £500k - all facilitated by Crowdcube. And whats more in a pre pack deal (yes another one) to Lyle and Scott, the founder of Front Up got himself a well paid job with Lyle and Scott which included his business loan being paid off.

Ok, so you might say this is just a coincidence and for just this one case, we might agree. However more recently, Keith Watson has reappeared on Crowdcube - this is for the third time. He is listed by Discovery Yachts Group as a director. DYG raised £2.2m on Crowdcube in January 2018, just a few months after Keith had joined them. DYG are still in business. However, you have to ask  - if investors had known about Watson's involvement in Front Up, ASTF and the now refunct DW Clothing, would they have been as keen to invest? Would they also have viewed his numbers, he is their FD, with more caution? They were not told - this is the description given for Watson on the Crowdcube pitch -

 KEITH WATSON - FINANCE DIRECTOR (58)
Keith is a highly experienced FCCA with extensive experience of fast growth businesses. He has worked primarily in the luxury retail market, at brands including Joseph and Aspinal of London. He has enabled a number of acquisitions and successful exits.

Keith John Watson gives his birth date at CH as May 1959. Well that is until you come across an entry for a Kieth John Watson with a birth date November 1959. This Keith John Watson gives the same address and its the same address that Keith Watson used to sign off the Front Up liquidation papers. We have said for a long time that CH needs to issue company directors with one unique registration number so that this 'confusion' is avoided. Of course knowingly giving false information as a company director is an offence. To all of us.

Looking at the numbers for DW Clothing and DSKG, we find some patterns. 

In the Crowdcube pitch in 2015, the historic financials given do not tally with the numbers given at CH nor do they tally with the numbers given in the 2016 Envestors ECF pitch, which raised another £426k for the company. So either the company filed false accounts or they gave fake figures to one or both of Crowdcube or Envestors. The differences are material. We know that Crowdcube dont check anything but we didnt know that Envestors operate a self check system. Which if you think about it, is a little pointless. The Envestors raise was after the management at DSKG had pivoted the company and attempted to go for a franchise model. We dont think Envestors did their clients any favours putting this business their way!

So, as the Times reported today here, DW Clothing has been binned and a newco Tailored Franchises Ltd, set up by the same people, has taken over. According to the Times there was no comment from the Administrator. Well Im not surprised  - he seems to be struggling to get at the truth. The fact that really matters here is that DW Clothing owned the brand and the logo for A Suit that Fits - trade mark EU011657781. This TM was registered in 2013 at Keith Watson's given address. According to the UK TM office, it is still owned by DW Clothing. So the Administrator can sell it. Whats more, all of the SM that Tailored Franchises is now using to sell suits, is still owned by DW Clothing. We know this because their pages were started in 2006 when ASTF was the name of the company. DW Clothing bought all of the assets of ASTF, so they own the SM and all its mailing list etc. That should be a valuable asset?

If this was an attempt to crook the system, then they have not done it very well. If the Administrator would get off his fat arse and do some work, he could attempt to sell all of these stolen assets - to the people behind Tailored Franchise Ltd. That would at least be the correct way to do things.

Meanwhile Crowdcube and Envestor investors, who own shares in DSKG Bespoke - the holding co which owned 100% of DW Clothing, are in limbo. Their only source of revenue in this business, DW Clothing, is being liquidated and somehow the directors have hived off the only things of any value into Tailored Franchises - even though they are not allowed to do this.

It should be noted that   -

  • In the Envestors PD for DW Clothing, they didnt use the registered TM for A Suit That Fits. We dont know why.
  • Tailored Franchises was incorporated in October 2017
  • The current A Suit that Fits web site is copyright to 'A Suit that Fits' 2013. This has no legal meaning. There has never been a legal entity with that name. The site is still owned by DW Clothing, even if the Administrator doesnt know that. In the T&C Tailored Franchising is shown to be running the site. Purchasing from this site is not advisable.
This collapse bears worrying resemblances to another Crowdcube fiasco - Ethos Global. With Ethos, the original appointed Cambridge Administrator couldnt cope with the depth of deceit that the old founders had perpetrated, so had to hand on to another one. So far nothing has been filed and the old founders are using the old company assets, which they do not own, to build a new business in London. Again all only possible thanks to Crowdcube. 


Well we did warn you.

Have a coffee - you've earned it.

An after thought -

When The Times contacted DSKG Bespoke about this story, they were by DSKG, that the nwsco was owned by DSKG. This was simply wrong. Later they changed this story to -  they would issue new shares to all CC SHs in DSKG. We have yet to see this happen. If, before this story broke, the directors of DSKG and DW Clohting had had any intention of 'looking after' their SHs (without The Times holding their feet to the fire), they would have made DSKG the sole owner of Tailored Franchises Ltd from incorporation, as they had with DW Clothing. They didnt do this. QED they are a bunch of crooks. Time for the FCA to actually do something. Crowdcube need to have their wings clipped. Enough is enough. Crooks can only get away with what the platforms allow them to chance.

   


5 comments:

  1. Extraordinary.

    ReplyDelete
  2. Rubbish fabric cut and made up in a 3rd World sweatshop.
    Alterations in Poland / Bangladesh. Customer service in India.
    Untrained " tailors". Management in cloud cuckoo land.
    A trainer with NO tailoring experience. A 19-year old Sales Manager with no experience or qualifications. Labour turnover so high, impossible to measure.
    Constant rounds of crowdfunding to cover losses.

    ReplyDelete
  3. Time for a few collars to be felt...

    ReplyDelete
  4. So, a newco with no right to the assets have taken them over without any investigation?
    Incredible.
    I think we are going to hear a lot more about this situation.

    ReplyDelete
  5. I hope we are going to hear a lot more about this case... cannnot believe this has been allowed

    ReplyDelete