London Capital and Finance

skyline

Just found out my elderly parents had 40k invested. I am devastated beyond words.

Botheredin

Immediate disclaimer: This is not aimed at LC&F or any associated company, rather it is an observation:

So here is how a model might work:

Person A, who may or may not have knowledge of scams and may or may not rely on fear tactics alongside knowledge of sales pitches, constructs a model that attracts an average £16,875 investment.

Person A cannot execute because of circumstances that could include lack of nouse in marketing, being prohibited from directing a company or not having all the components to make it work.

Person A speaks to Person B who has access to companies in need of investment. Person B could possibly facilitate the marketing or could choose to outsource it for operational expense / operational efficiency reasons (OPEX / OPEFF).

So, Person B speaks to Person C who has marketing acumen and can put together an online campaign.

Persons A, B & C then meet up and agree a model that looks like:

Person A – Cut of 10% from Person B and cut of 5% from Person C.

Person C then recruits a telesales / tele-handling staff to handle inbound leads and upsell on those leads generated by a company under control of Person C but actually listed under a sole directorship of Person D who is being fed crumbs and is happy to do this. Person C takes 20%, Person D takes 3% of the total take.

Person D then registers feeder websites that advertise, via paid search, on the most popular social media sites and search engines because those companies will take money for this and there is nothing wrong with it in principle.

Person C&D then advertise an “ISA” compared to other ISA’s. The top rated ISA purports to return 8-11% whilst other ISA’s from mainstream brands are showing returns of 1-3%.

Attractive right?

Of course, it is and when prospective investors click the link they are taken through to Person B’s site where information is gathered such as name, email, phone etc. Except the 8-11% "ISA'S" aren't ISAS's. They are unregulated bonds sold under the marque of the FCA who authorised Person B's company to use that marque but originally for selling insurance bonds which might be 5% of their business or none at all.

This links back to person’s C&D operation where they qualify the lead and collect payment information and, maybe, funds.

Person’s C&D then collect 20% and absorb the £30-50k per month on advert and OPEX.

Person B receives the 80% remainder and they, along with Person C, pay their tribute to Person A.

Collectively the four then pay Persons E-Q “loans” except anyone person at E-Q could be the same as person B-D or, at least, closely linked to them.

The interesting part could be that Persons A-D are actually paying 8-11% to investors but that the “loans” made to companies controlled by Persons E-Q are not paying this money, rather it is new investors monies paying it because the original terms for the first investors lock their money in for 3-5 years.

The new investors play on the same terms and eventually the scheme folds when no new money comes in.

But who loses?

Well, one theory could be only those who came in late.

Another theory could be everyone except persons A-D because an elaborate company structure was set up just for this purpose and that the money vanished to themselves and friends and that the directors rely on protection from sub-standard law enforcement in terms of fraud offences and “loose” de-lineation between criminal and civil law when it comes to fraud.

Of course, maybe no one loses and it all works out lovely for the investors and fund managers. It could be a credible scenario.

One thing I cannot see is how does any fund return 8-11% if 20% or more goes out the door on the way in o commission. The maths does not add up over 3 or even 5 years on a 14-20% loan rate on P2P loans. Could be wrong and happy to be corrected.

Just a thought.

Botheredin

skyline wrote: »

Just found out my elderly parents had 40k invested. I am devastated beyond words.

Hope they are ok and hope it works out.

masonic

Botheredin wrote: »

Possible but in this case it doesn't seem to quite work like that. The previous search terms can now be searched on any device and the ads relating to top-isa-rate etc etc will not appear. They have been removed by the paying advertiser of those sites apparently.

My comments were not in relation to ads. I don't see any ads on Google because I have an ad-blocker installed. Google also customises normal search results and will rank those related to your browsing and search history (including but not limited to those you have previously clicked) higher so that they will appear closer to the top of the list.

Even though I saw no ads, I did see the site {text removed by MSE Forum Team} mentioned above, underneath all of the well known comparison sites. It wasn't an ad, it is just well optimised to rank in normal Google search results for that query.

masonic

Botheredin wrote: »

One thing I cannot see is how does any fund return 8-11% if 20% or more goes out the door on the way in o commission. The maths does not add up over 3 or even 5 years on a 14-20% loan rate on P2P loans. Could be wrong and happy to be corrected.

The 20% or more is effectively for the initial referral of the new client. There is the interest of 14-20% (it's not unheard of for rates charged to business borrowers to be even higher - when they are high risk and nobody else will lend to them). There will also normally be an arrangement fee of say ~3%. So the commission would be paid for out of the first 2 years profits. Thereafter the customer may renew and/or take out additional investments direct that are free of commission.

The bigger question is how can the borrower afford to pay 14-20% APR on their debts. Monthly interest of 1.5% (18% APR) is fairly typical for this type of borrowing. Property developers and start-up companies are typical borrowers. There have certainly been instances in P2P where borrowers have borrowed all of the money they needed to fund the purpose of the loan, plus all of the money they would need to pay back in interest and fees, and secured it on the assets they needed to buy, with not a penny of their own money at risk. Which is fine if their venture is successful, but if it is unsuccessful they can put their company into Administration and walk away having lost nothing.

robatwork

This whole thread is like watching the slowest car crash in history.



Just working out where the characters involved are - in the car, in the car in front braking hard, or innocent pedestrians.

Jelli

I'm the granny walking across the road when the lights were green, but lights weren't really green. The lights lied to me. They were funded by the council but constructed by a private company to give false signals.

verybigchris

Most of us were stood 10 miles back up the road, trying to warn potential passengers that the car had no brakes, no steering wheel and was made of cardboard.

Alexland

masonic wrote: »

The 20% or more is effectively for the initial referral of the new client.

I don't understand how the administrator on BBC MoneyBox confirmed that the amount of money loaned to the 12 companies matches the amount of money LC&F had taken from its bondholders if such a high referral fee had been paid? I doubt the referral fee was being paid from shareholder capital.

Alex

masonic

Alexland wrote: »

I don't understand how the administrator on BBC MoneyBox confirmed that the amount of money loaned to the 12 companies matches the amount of money LC&F had taken from its bondholders if such a high referral fee had been paid? I doubt the referral fee was being paid from shareholder capital.

Alex

It is unlikely it was paid up-front. More likely, as I stated above "the commission would be paid for out of the first 2 years profits", presumably as trail commission.

Suppose a borrower needed £800,000 to buy a large plot of land for a housing development with a GDV of £5,000,000 when completed. They go to a sympathetic lender, who is willing to lend to them at a rate of 1.5% per month with a 3% arrangement fee. The borrower therefore decides to borrow £1,500,000 over 3 years secured on the land at a LTGDV of 30%.

The amount owed by the borrower is £1,500,000, matching what LCF raised from bondholders. Half of the interest repayments (£11,250pm, total £405,000) goes to bondholders, while the other half plus the 3% arrangement fee (total £450,000, 30% of the sum lent) comes in to LCF. LCF then gives 2/3 of that in trail commission to the introducer and retains the other third.

Of course, I've kept the numbers fairly simple. In reality bondholders wouldn't get as much as half the interest received by LCF, and likely the split between introducer and LCF would be more in LCF's favour. Of course this split would be for new marksclients only, existing clients would be free of introducer and therefore be much more profitable.