Insolvency Service get it wrong again over Solar Cloth Co

The UK Insolvency Service has looked at the dealings of the Director of The Solar Cloth Company and decided that they do not warrant any action. 

No that is not a joke. 

You may remember the SCC. It helped itself to loads of investors cash using false information about the founder and his previous antics. The story was well written up in The Times. It was a caste iron case of fraud - all helped out by the Crowdcube platform.

Now in letting this individual go, without any reprimand the Insolvency Service quotes Section 6 of the Company Directors Disqualification Act 1986 where in order to be disqualified, said director has to have acted in a way that makes him unfit to be a company director. Text below -

Dear Sir/Madam, 

The Solar Cloth Company Limited Company Directors Disqualification Act 1986 I refer to previous correspondence in this matter and advise that as a result of the investigation undertaken, the Secretary of State does not propose to take disqualification proceedings against the directors of the above company. Such disqualification proceedings when brought are done so pursuant to Section 6 of the Company Directors Disqualification Act 1986. 

Whilst this may not be currently relevant to you it might be helpful for the future if I advise you of the wording of that section. 

It says: (1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied — (a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company”. 

Accordingly if, in the future, the Secretary of State should learn of any unfit conduct relating to this company it could be included in any disqualification proceedings brought in respect of this or any future company failure. 

Yours faithfully Naomi Fulford 

Well if this guy has not acted in such a way then we are not going to see any companies' directors disqualified ever again. Also, it seems unlikely the company will be able to oblige the Secretary of State in the final comment as it no longer exists! What a ridiculous outcome.

So just beware the presence yet again of one Perry Carroll or whichever name he chooses from his list. He'll be the one flying some amazing money spinning business and asking for your cash.

We wrote about him and SCC here

Clearly something needs to done about the 1986 Act - yet another piece of useless legislation that pre dates the mass use of the internet. Just WAKE UP will you please.

Ethos Founder resigns and still no accounts filed.

Ethos Global, who raised £709k on Crowdcube less than 12 months ago, are now 6 months overdue with their accounts and AR. Now the co founder, Ms Hersch, has resigned.

The company's 2016 Crowdcube pitch talked a great game about their existing and highly successful Cambridge studio and the plans to open many more. Shortly after raising the funding, the Cambridge studio closed with the property being put on the market by Bidwells. They then opened another first studio in their chain, in London. So far that's it.

We have written about them before here.

When contacted, the company pretended to have a PR department, who unsurprisingly refused to answer any of our queries. Readers may remember that the Solar Cloth Company also came from Cambridge........perhaps something to do with the waters of the River Cam being a little murky?

As some one below has very kindly pointed out - this is not the full story. Hersch has just joined a company called Ethos London England, which was incorporated in February this year and is in turn wholly owned by Ethos Enterprise Holdings  - also set this February and wholly owned by the other founder of Ethos Global, Dr Theo. Of course this all be for very good reasons but it seesm a little odd that shareholders in Ethos Global, who are waiting for accounts, have to watch as these two play pass the company. The music will surely stop soon? 

The reason we didnt see this connection before, is that these two both have names that lend themselves to multiple entries at Company House; a feature which you may remember was prominent in Solar Cloth Co fiasco.

We wonder if this could have anything to do with the Cambridge lease? The property is still vacant and if their lease was a long term one with no break clause, ditching Ethos Global might be a solution in a pre pack deal. Wait and see.

Solar Cloth Company sails away with new buyer??

Interesting piece here about Solar Cloth potential sale to ex director - our guess is Perry and ex backer, again our guess is the guy who put in the £500k, Charles Shale. As Crowdcube shareholders dont have any position here, they will most likely be shut out - the administrator's job being to rescue money for preferential creditors.

http://www.businessweekly.co.uk/news/cleantech/solar-cloth-company-set-sale-out-administration

All a little too obvious we think!

Crowdcube's Luke Lang gives 'evidence' at HoC Treasury Committee.

First point is what the hell are Crowdcube doing at this committee giving MPs advice and secondly Lang is guilty of a blatant untruth in his response to Alister Jack MP. We really are living in a fantasy world.

Lang is asked a few very pertinent questions by Alister Jack MP at around 11.36am - why do things always go wrong at 11.36am? It turns out that Alister has invested in a company on CC - the outcome is not revealed but maybe the line of questioning is a clue.

Just as a note here, Alister Jack is himself a highly successful entrepreneur, having co founded an Edinburgh based marquee company back in the late 80's which grew to be very large marquee company - Field and Lawn. So he has some form when it comes to talking about successful start ups and how best to help them. I know all of this from first hand experience as we were both cutting our teeth at the same time in Edinburgh as entrepreneurs. You can tell he was rather better at it than I. 

He starts by asking Lang about the degree to which Crowdcube is liable for the information it produces on the platform. Lang says that they carry out extensive checks and get the companies to sign off all their pitch claims. Well that's not completely true as we know but it's passable. Then Jack asks about a company that had funded on the platform and went bust and it was proved information in the pitch was not correct or missing; who would be liable. 

Lang responds with a total untruth. He says that to the best of his knowledge this has never happened.

Luke you do remember Solar Cloth Co? Surely. It was on here and we helped the Times write it up - it was well covered and you were asked questions about it at the time. Investors were most definitely not given the right information about the founder and his previous businesses. They were in fact misled. Ethos Global is another one. Ovivo was another where the information was not too good. There are several others that have gone bust where claims made on the pitch were dubious at best. Tip of the iceberg.

Crowdcube took no responsibility and investors lost it all.

Of course Lang was only at the HoC as an 'adviser'; he was not under oath. Which in itself is total joke. It would be like asking Fred Goodwin to advise on banking reform. Or Tony Blair to advise on Intelligence Reports. 

Where is the counter balance?

Vested interests, as always, win the day - it is no way to run a country.

Solar Cloth Company new owner files for Liquidation

The Saga of the Solar Cloth Company, which we revealed some months ago, keeps on going. Funded via Crowdcube and bought out of administration shortly afterwards, the purchaser has now also gone bust.

It was not clear for sometime who had bought the assets of SCC from Irwin and Co - the insolvency company dealing with SCC's administartion. However it has now come to light that it was Base Structures, who had entered into a JV with SCC before all this kicked off.

So now Base Structures have filed for Liquidation. 

According to the filed documents, SCC had invested £1.5m in Base Structures. One of the Base Structures directors, Chris Ives, is also to be found on the documents filed for SCC, verifying them. 

The liquidation of Base Structures is being handled by the same company, Irwins, as the one that is still in charge of the administration of SCC. they have not filed any documents since the initial report.

Draw your own conclusions. 

The Solar Cloth Company Crowdcube Fiasco illustrates the depths of the problems faced by Equity Crowdfunding.

Today's revelations in The Times about The Solar Cloth Company (SCC), which we helped to put together, reveal a dangerous absence of reality at Crowdcube and the FCA.

Dont get us wrong - we know that all success stems from failure. There is nothing wrong with failing, in fact it is the best proving ground. But its the nature of the failure and your ability to learn from it that counts. It seems, despite many examples of the same repeated problems, that equity crowdfunding is not learning anything.

A good business can fail for any number of reasons but fraud is not one that should be accepted. We and you, the investors, only get to hear about the problems once the company has closed and it can take a while to burn £500k or £1m. By then it is too late and many more pitches would have been funded using often similar deceits. 

SCC is just one case in many that illustrates clearly that the number one UK platform, Crowdcube, is simply not carrying out proper due diligence and never has. You can see the same patterns in other Crowdcube funded pitches that have either failed or missed targets by millennia. Here are few to make the point -

Water Babies the Musical
Front Up Rugby
Ovivo
Crumpet Cashmere
88 Delicious
MASS
Rebus
Pizza Rossa
Droplet
Bookbarn International
Fourex
Shopwave
Rushmore Group
Kammerlings
Righteous
London Distillery
Zero Carbon Food
Brupond
SDL
Kinopto
Wild Trail
PDB
Icomply
Ineed
Stakis Daycare Nurseries
Flavourly
Ubrew
Red Advertising
Green and Pleasant
Get Site Tracked
Seek and Adore
Share and Compare
Glassfit Inc
Hug and co
Bubble and Balm
Lawbit
Solarmass
Playrcart
Uni Fuels
Pixelpin
Dr Jackson
7 Billion Ideas
Jam Vehicles
Frank Staks
Deskbeers
Peach Lettings
My Barrister
Minor Figures
New Galexy
Crowd Mortgage

You get the idea, there are plenty more. Under this pile lie ten times as many, that have not yet filed accounts  to show how they have performed post investment.

Crowdcube, by their own admission, did not check SCC's future £4.5m sales pipeline, which we now know was fictitious. They did not check the immediate sales figures given by the company, which we now know were fictitious. They did not check out SCC's MD and his past record, which turned out to be verging on fraud. All they actually checked was that they had projections enticing enough to fool 400 investors into parting with their cash; a total of almost £1m.

Crowdcube picked up a 7% commission on that, so is it any wonder they dont bother to lift the covers? When the company goes tits up, Crowdcube get to keep their 7%, no matter how negligent they have been. It's a gravy train.   

We first contacted Crowdcube in early 2012, when it became apparent to us that their due diligence was very poor or non existent. We offered a remote service to them, FOC at first, to help them. They turned this down saying they had it all under control in house. Well, we can all now see what a whopper that was. Now they tell us that when SCC pitched last year, their systems were lacking (!) but now they have tightened them up. Haven't we heard that before, several times? 

What is more alarming is that you, the investors, seem to support this platform, whatever they get up to. Incredibly so far, to the tune of £6.6m in their latest cash grab on their own site. Maybe you do not realise that the failures we have seen so far will be as nothing compared to the failures which are backing up. Of course we expect some of Crowdcube's 426 raises to be successful - at some stage, later.....probably......well perhaps, possibly. In fact there is now a pitch on the site which we helped, MindGenius, which if funded could well go on to give investors a good ROI. We know this one has credible forecasts and a great pitch; we helped create them. 

But many of the 426 that have funded, it not all, are doomed to failure for the very simple reason that the platform encouraged them to pitch with totally unrealistic projections, valuations and expectations. And as we now know from the SCC debacle, they dont bother to check these out. Two good current examples are Sugru and Earlybird, both now trying to raise new capital on Envestors - having missed their Crowdcube projections by miles. See here- http://fantasyequitycrowdfunding.blogspot.co.uk/2016/07/why-early-bird-regurgitates-on-envestors.html and here - http://fantasyequitycrowdfunding.blogspot.co.uk/2016/07/are-sugru-coming-unstuck-after.html

If you do not believe what we are saying and clearly many of you don't, then just look at the current case of Verto Homes.

The two founders were involved with Manor Rose, admittedly before Paul Moore took over, but nonetheless it is the same company - see here. You dont get that mentioned on Crowdcube.

Towan Heights LLP is a company so closely linked to Verto Homes that it has the same address and email and Verto own its website and sign off its accounts. Towan Heights LLP have overdue outstanding loans with Funding Circle which get no mention on Crowdcube - the amount is around £1.7m. We are told that if the money is not repaid by the end of July then FC may take legal action to get it back. You dont get that on the Crowdcube Verto Homes pitch, which is now at £1.5m raised of an original £1m target. The loans may well be paid back and yes Verto Homes are legally correct when they state that they have no exposure to FC directly. But in the FC loan documents, Towan Hieghts LLP talks about Verto Homes as the builders of the project being lent against. They are essentially one in the same.

All Crowdcube have to do is mention these facts - they are facts after all, so why hide them? Then investors can quite rightly make up their own minds. So why dont they do this? It seems that the urge to complete pitches, which is their main or only revenue source, is over powering. They just cant help themselves. They tell The Times that they have beefed up their DD since SCC; well here we find out otherwise. Unless of course they chose not to reveal these facts. Crowdcube's own DNA gives us a clue - they have dressed themselves up in some rather exaggerated claims - see here

When you build a company that is burning over £8m a year on its very existence and is backed by a GP of around £2m, then you need to cut corners. Ever since they started in 2011, the founders have ducked and dived like a couple of wide boys. Massive expenditure on PR is seen as far more important than any expenditure on the due diligence. Crowdcube employ interns to run their show; we know as some have spoken to us.

The conclusion has to be that Crowdcube is not fit for purpose. But the FCA are unwilling to touch them and now both Governemnt and large VC's have far too much at stake to admit it. Only the 285,000 investors can make the required change happen. Oh no wait, Crowdcube have corralled them into their own stable by making them shareholders as well, so they wont do anything either.

The arrogance of the Crowdcube founders is indicative of an era where arrogance has replaced the truth. We face the chance of being removed from the EU by the arrogant lies of Bojo, Dan Hannan et al and the chance of seeing a US President so arrogant in his ignorance, it beggars belief.

Just read the posts on this blog if you need convincing. 

Companies House is a steam engine in an high tech age.

What information filed at Companies House can you believe? All or none - it is a total lottery.

We went a CH seminar for new businesses last week. It was jolly enough event. However, when we asked about several areas of concern in relation to the veracity of the information they hold, they very quickly moved on - brushing the issues off as not up to them. Strictly speaking they are right, but a change needs to come soon if we are not to have some very serious disasters.

Take for example the company we looked up today, which had funded on Crowdcube in 2015. Their accounts just filed show share capital of £1 - ie none. Yet the Crowdcube platform and the company's AR show the shareholders. This is just one instance we have found over the last few years. The accounts are simply wrong. There are plenty more.

The CH representative told me that they have a clean out every so often which picks up any errors, he was unable to tell me how often. Equity Crowdfunding relies heavily on the veracity of the information filed at CH. 

Another issue we raised was the way that company directors are registered. You can have numerous registrations for the same person - with no overlap in the records - simply by using your names in different sequences. You may remember a classic case with Solar Cloth Co - he had 6 different CH registrations - none of them showed the directorships of the other 5. It would be very easy to fix - one unique number issued the first time you register and it becoming an offence to re register. Solved. 

Lets face it both CH and HMRC are struggling in the modern world. Short of resources and possibly know how, they need to get with the plan or we will be in one hell of a mess.