Initial report on Rebus debacle now filed

Rebus' administrator's report tells us little new, apart from the on going enquiry into the management.

The sad tale of Rebus - funded via Crowdcube to the tune £800,000 and shortly afterwards defunct - takes one more step to completion.

We have written about this a many times - here  . It's a classic case of appallingly poor due diligence by Crowdcube. The main man behind the company's Crowdcube raise was a currently banned FCA operator. This, if declared by Crowdcube, would surely have prevented this mess. They either chose to hide it or never knew about it. 

So what are the consequences of this blatant negligence for Crowdcube? As usual absolutely nothing. Are they really already too big to fail?

Crowdcube provides the road kill for the vultures

This piece from the FT Advisor makes interesting reading - here.

You have to wonder if it is sensible to allow the same company involved with the management of Rebus before it failed to be in charge of the administration? Certainly Resolve will be tracking Crowdcube road kill for the next juicy scraps.

From the same article this is a telling indictment of Crowdcube's claim to turn away 90% of the pitches that apply because they are not viable -

Gareth Fatchett director at Regulatory Legal Solicitors, said many(claims management co's) find it difficult to make enough money out of mis-selling claims as they try to move on from payment protection insurance (PPI) complaints.

As we said before Rebus was not viable so why were they allowed to pitch?

Crowdcube try to make excuses for Rebus failure

Crowdcube's blog now has this posted - a so called explanation by you know who - on Rebus

“As clarification, Rebus had two meetings with ReSolve in May 2014, a corporate finance advisory firm unrelated to Crowdcube, to discuss potential funding options prior to Rebus’ raise on Crowdcube, we were not aware of these meetings and it was not disclosed on the company’s pitch. However, it is normal for businesses to explore different funding options in their early stages, so Crowdcube would not have been surprised or alarmed by the ReSolve meetings. As many entrepreneurs and investors will appreciate, raising finance is difficult and not every conversation with an advisor or investor will result in an investment. Disclosing details of previous fundraising attempts is not standard practice even in traditional fundraising.”

Now there are various problems with this 'clarification' - if that is what it is.

Firstly it may not be general practice for 'fundraising attempts' to be disclosed - no one is looking for a published weekly list of them . However you can be sure that savvy professional investors, VCs and banks will have their ears wide open to the market where these attempts have to be made. So they would have known, as should Crowdcube. Crowdcube didnt know simply because they have no interest in their investors.

Secondly the wording they have used for these failed meetings is very different to the wording issued by the Administrator. He stated that Rebus was in financial difficulty - Crowdcube just say here that the meetings were run of the mill, to look at 'potential funding options'. The two are not compatible.

Given that the Administrator has no axe to grind and Crowdcube do, who are you going to believe? The proof seems glaringly obvious.

Interestingly the Chairman of Rebus made a telling comment when he said that the Administrators' 'interpretation' of events was not helpful.

It seems that the truth can be a right pain in the arse sometimes.

Crowdcube admit they failed to check Rebus investment

So now we have it. Crowdcube have admitted they had no idea that Rebus had tried and failed to raise capital through Resolve only months before they launched their Crowdcube scam. Or that they tried and failed again only months after raising £800,000 on the ECF platform.

See here for the full article we helped the The Times put together -

http://www.thetimes.co.uk/edition/business/crowdfunders-misled-by-pitch-face-massive-losses-2h2vwdzw6?acs_cjd=true 

Luke Lang, Mr PRing from Crowdcube, goes on to say that Crowdcube's lack of due diligence into Rebus's financial state was not a serious issue! We think this proves beyond any doubt that the traffic at Crowdcube is all one way - in favour of the companies raising the equity. Fudge the investors.

Crowdcube, as anyone who reads this blog will know, do not have a due diligence department or if they do, they are always out to lunch. If they had a working version, they would surely have picked up at least one of the two signals flashing red from Rebus's plans - one the comapany's crippling cash flow or two the fact that the front man for this Crowdcube scam was a currently banned company director.

Well they failed to see either of them. This means they are either blind or worse still that they connived with Rebus to hide the facts. Either way, we end up with another .........

News on Rebus debacle proves Crowdcube model is flawed

Crowdcube now need to answer some very serious questions.

In the 2.17B just filed today at Companies House, the administrator writes -

''In May 2014 Resolve were engaged for one month by RIS (Rebus) to seek and identify potential investors, however no investment was received. Following this exercise the directors (of Rebus) sought to raise the required capital through a crowd funding scheme.  The Directors successfully raised about £800,000 which allowed RIS to continue to trade''

So it is clear that as early as May 2014, Rebus was in trouble. Again it is stated in the Administrators report that Rebus found it hard to generate enough cash to continue trading.  Of course the Administrator could have replaced the word 'scheme' with 'scam'.

The report goes on to identify that in November 2015, so just a few months after helping themselves to £800,000 via Crowdcube, Rebus was again asking Resolve to find new investors on the back of their intention to file for administration.

So the obvious questions for Crowdcube are -

1. Why when the company had failed a year earlier to raise any money from professional investors, did you allow this pitch on your site - without making ANY MENTION of this failure?

2. Why was this cash flow problem, identified very clearly by the the Administrators and the directors of Rebus, not part of the Crowdcube pitch to investors. In fact why was this flaw in the business plan, known as it was at the time to the directors of Rebus, hidden from investors.

Finally a question for the FCA -

Why are you not taking any action against this kind of malpractice?

Here we have a clear example of a FCA regulated platform chosing either through its own negligence or deceit to offer investors a deal that was very clearly not as described. The result, a total mess for all concerned. All of which could have been very easily avoided by Crowdcube simply refusing to allow Rebus to pitch.

Crowdcube are very simply not fit for purpose.

Crowdcube's Rebus rides the Domino Line

While we wait for the full story behind the collapse of Crowdcube funded Rebus Investment Group, we thought this might interest you.

Back in October 2015 the film finance and tax planning firm Chancery UK, went into liquidation, owing hundreds of millions of pounds. The firm also offered wealthy clients tax advise based on property tax breaks.

The founder, Peter Nichols is a Michelin man and now runs the same operation with a new name. He used to be an HMRC inspector so clearly knows his ways around the dark back allies.

Back to Rebus.

Rebus was handling the claims of 90 of Chancery's clients when it too went into liquidation also owing large amounts. There, you see, off they go once you have pushed the first one. Estimates are that these 90 clients were claiming a total in excess of £65m via Rebus.

In a lovely twist, Martin Taylor, Head of Rebus' Client Relations when Chancery collapsed, told reporters ' Yet again we see another firm fold leaving behind a mass of debts and claims'. A few months later his dominoes were travelling along the same line.

Look, it's not our fault Rebus went bust.

So what do have here?

Crowdcube get Rebus funded, even though Rebus are employing one Richard Rhys who was and still is a banned person under FCA regulations.

This appeared today -
http://www.ftadviser.com/2016/02/17/investments/rebus-clients-face-bn-in-losses-says-law-firm-nCXfSMkJn73vZ7rmf0euvL/article.html

Rebus take the money, spend it and collect almost £1bn in claims applications then go bang bust. All the investors £800k gone plus some and now its becoming clear that the claims they have stacked up in the office may run out of time, leaving claimants empty handed.

What is the reaction to all of this from the people who in large part enabled this debacle - Crowdcube?

'There will always be failures as it's in the nature of the asset class'' or something along those lines has been trotted out yet again, They will need to get some swing doors in the stables as this excuse has been coming and going a awful lot recently.

How is possible for the DD dept at Crowdcube to miss the fact that Rhys was banned from taking part in ANY activity ASSOCIATED with ANY regulated function?? Quite simply it is not. Not even for them.

So one has to assume they knew but just failed to include it in the pitch?

Crowdcube will of course claim Rebus' demise was not their doing and of course they are right. Or are they?

To promote such a large pitch from a company that included as one of its key members a person who was banned by the FCA for 6 full years, for being either very stupid or very corrupt, seems to us to be irresponsible. Really it is verging on gross negligence. The fact that the company was happy with Rhys' credentials says an awful lot about the rest of the management and therefore about Crowdcube.

The FCA have now stated that Rhys was not in breach of his ban because he worked for Rebus which is not FCA regulated and the pitch was run by Crowdcube which is. We find this very hard to understand given the very precise wording of the ban and the fact that he appeared in the Crowdcube video promoting Rebus on the FCA regulated platform. How is that not breaking his ban?

We have been saying for a few years now that actions always have reactions and you cant fund rubbish companies and not expect the fallout to have far wider consequences than the investors losing their trousers.

It's all rather sad and no doubt will get worse.

Don't worry though, Crowdcube are fine - still pumping out ridiculous projections for grossly over valued and soon to be zombie companies. After all, none of this was their fault.

FCA OMG NO please.

We are finding it hard to decide whether it is the FCA or Crowdcube who employ the higher grade of moron.

The recent debacle with Crowdcube funded Rebus threw up one very hard to explain fact. The pitch on the platform was being led by Richard Rhys, who was at the time (and still is) a banned person for the purposes of carrying out any FCA regulated activities.

The exact wording of the ban is  -

The FSA had decided to impose an order prohibiting Mr Rhys from performing any function in relation to any regulated activity carried on by any authorised person, exempt person, or exempt professional firm on the grounds that he is not a fit and proper person in that he lacks competence and capability.

The ban was the full 6 years, so was not some slap on the wrists.

When asked about this, the FCA have stated that as Rhys wasnt employed by Crowdcube and Rebus was not a FCA regulated company, he was not in breach of his ban.

We would strongly disagree.

How can actively taking part in an FCA regulated activity (he appears in the pitch video) on a platform regulated by the FCA not be '' performing a function in relation to a regulated activity carried on by an authorised professional firm''?

Are you surprised our financial institutions run rings around them?

FCA wash hands of banned Richard Rhys and Rebus fiasco

This gets better and better.

The FCA have stated that Richard Rhys was not in breach of his FSA (FCA) banning order when he was part of the team raising £800k on FCA regulated Crowdcube -  because Rebus was not FCA regulated.

Ok so that bit is simple. But the banning order states -

   The FSA gave Mr Rhys a Further Decision Notice on 6 July 2012 which notified    him that, pursuant to section 56 of the Act, the FSA had decided to impose an    order prohibiting Mr Rhys from performing anyfunction in relation to any      regulated activity carried on by any authorised person, exempt person, or exempt  professional firm on the grounds that he is not a fit and proper person in that he  lacks competence and capability

  So what do you call raising money on an FCA regulated platform (Crowdcube) if it is not -
'    
'    'performing a function in relation to a regulated activity'? 

  The FCA have become a national farce - Im sure if Gilbert or Coward were still with us they would be         scribbling away creating a new FCA play or musical.

  And you do have to ask why Crowdcube are promoting a pitch that employs someone who is not ''a fit
 and proper person in that he lacks competence and capability.''

  Surely we can do better. 

Crowdcube must be held accountable for Rebus

The Rebus debacle just keeps going.

It turns out that Crowdcube published the pitch with one of the key members of the team listed as Richard Rhys.

He is described in the pitch  -

Working for the board helping the business launch to the market. Richard has been one of the driving forces behind Rebus. He started his career in the British Army as a mechanical engineer, before moving to the world of Financial Services where he applied his skills in a number of areas including complex products and structured debt solutions.

In 2012 Rhys was banned by the then FSA -  full prohibition ban for his part in the failure of MNFA. The FSA ruling included the following - 

On the basis of the facts and matters summarised below, and set out in more detail in section 4 of this notice, the FSA has concluded that the EBP Scheme was promoted in a way that risked it being mis-sold to the investors and Mr Rhys was directly responsible for this. In particular, the FSA has concluded that Mr Rhys:

(1) made statements in order to promote the EBP Scheme that obviously risked misleading investors (and did in fact mislead them), without applying his mind to that risk; 

(2) caused MNFA to promote the EBP Scheme without conducting proper due diligence and without complying with the regulatory standards, including the required statutory and regulatory promotional requirements for an unregulated collective investment scheme; Page 3 of 26 

(3) failed to inform himself of and understand the relevant UCIS requirements; and (4) failed to take any steps to ensure MNFA assessed the suitability of its advice to customers.

So you have to ask the Crowdcube out to lunch department what was on the menu the day they did their robust Due Diligence on Rebus - the DD that allowed a banned individual to be part of a front for the promotion of a £800k plus equity sale to the public. 

Quite simply why was this information missed out of the Rebus Prospectus?

We'd like to say we told you so but that wouldn't help. Crowdcube must be held to account.

Rebus Fails

Rebus raised just over £800k on Crowdcube only 8 months ago. The company and the Crowdcube experts valued Rebus at just a little over £12m pre investment.

The pitch on Crowdcube opens with  -

''Rebus seeks to bring hope to ordinary Investors who have been misled into buying flawed complex financial products & solutions.''

The company appointed administrators a few days ago - its not posted anything yet with CH.

So where does that leave us?

It is not the largest failure in UK Equity Crowdfunding history as the FT claimed a few hours ago. That honour remains with the Musical Waterbabies which sank without trace over a year ago, taking over £1m of Crowdcube investors money with it. It does come a close second.

Really you would hope that Crowdcube would come up with a better line than the one they gave the FT -

“Whilst the failure of any business is disappointing, not all businesses will succeed and therefore highlights the importance of spreading investment risk with a diversified portfolio,” said a spokesperson for Crowdcube.

“Investors on Crowdcube can be assured that we are committed to ensuring transparency and have rigorous due diligence processes in place, which are spearheaded by an experienced team of legal and compliance professionals.”

We think its time for everyone to WAKE UP. 

ECf is in danger of being dragged to the bottom by the failures of platforms. Very shabby.