Was AVRO trading illegally or fraudulently for the last 2+ years? Was it like a Ponzi Scheme?

ihatetrump

Which is why I said 'in all but name' 

The investors borrowed from their customers, without the customers' knowledge or permission, who were lead to believe it was to fund their future energy costs - their scheme could only continue to grow by being able to grow their customer base.

Call it what you will - it was a scam - a company built without any investor money (save £100 share capital) and therefore no risk to the investors - unless personal liability comes into play for insolvent trading.

oliverbrown

ihatetrump said:

Which is why I said 'in all but name' 

So why are you going on about Ponzi schemes? An accountant of 40 years should know the difference between investors and customers.

ihatetrump

Maybe because there's no accepted name yet for this type of scam, but the MO is very similar - no time to get hung up on semantics.

jimjames

oliverbrown said:

ihatetrump said:

Which is why I said 'in all but name' 

So why are you going on about Ponzi schemes? An accountant of 40 years should know the difference between investors and customers.

I'm not an accountant but this certainly has all the hallmarks of a scam - the difference is that there is no obvious victim other than all of us that have energy supplied in the UK. Without a clear victim it makes it more difficult to get action taken but maybe the big players will put pressure on. Ultimately it looks like they've found a way to extract money using various techniques or loopholes that stays just inside the law but were never intended to be used in combination in that way.

I did a lot of investigation into London Capital & Finance which I'd flagged as a ponzi scheme when the administrators said all was accounted for despite all the signs being there for years beforehand yet no action was taken. If a non accountant with zero training can find out then anyone who was qualified should have seen the red flags a mile off. LCF's mistake was to get too big to be ignored. Blackmore Bond have used similar techniques and have probably managed to get away with the business failure line being substantially smaller.

[Deleted User]

I was reading this earlier :-

https://www.thisismoney.co.uk/money/beatthescammers/article-10027639/Why-Companies-House-helping-fraudsters.html

What a strange setup.

MWT

DeletedUser said:

I was reading this earlier :-

https://www.thisismoney.co.uk/money/beatthescammers/article-10027639/Why-Companies-House-helping-fraudsters.html

What a strange setup.

It has been this way for a very long time though, not a new problem and one reason why I routinely check to make sure my name hasn't been attached to companies I am not involved in.

mellyflewus

MWT said:

It has been this way for a very long time though, not a new problem and one reason why I routinely check to make sure my name hasn't been attached to companies I am not involved in.

i didn't realise so thanks for this tip.

wakeupalarm

Stable door, horse, bolted.

Ofgem warns energy suppliers of strong enforcement action as crisis deepens

Britain’s Energy Regulatory Authority has warned electricity and gas suppliers it will work with UK police and fraud authorities if it suspects companies and their managers of actions that lead to a “material deterioration” of the supplier’s financial position.

Ofgem’s head of retail, Neil Lawrence, sent a stern letter to all retail energy suppliers this week reminding them of their responsibilities to “minimize any costs” that could end up spreading across all consumers’ energy bills when the supplier collapses.

The letter, a copy of which has been seen by the Financial Times, was sent a day before three other suppliers went bankrupt on Wednesday in the face of record wholesale gas prices. The list of losses in Britain’s crisis-hit retail energy industry has now risen to 10 since the beginning of August.

The strength of Ofgem’s market oversight has come under scrutiny in recent weeks, with some major energy companies and analysts claiming there was a disaster waiting to happen in the industry because a number of suppliers had weak business models and inadequate hedging strategies.

Lawrence warns in the letter that Ofgem will consider using the “full extent” of its enforcement powers in relation to “any action taken by Supplier and/or its managers that could reasonably be seen to result in a material deterioration in the supplier’s financial position, or increase the risk of such exit.” the resource from the market in an unregulated manner, or increasing costs at risk of being exchanged across the sector.”

“Where appropriate, we will work with other public bodies, including the insolvency department, police or process fraud, to address this behaviour,” adds Lawrence, referring to the UK’s Fraud and Cybercrime Reporting Centre.

The letter was sent to suppliers on Tuesday along with a 12-point questionnaire indicating that the regulator was ramping up its monitoring of the industry.

Questions include: “Please confirm that the company’s assets exceed its liabilities at the end of the last full month.”

When asked to comment on the letter, which was delivered via email, Ofgem said: “Our number one priority is customer protection, and with companies out of the market, it is right that we remind suppliers as regulators of their legal obligations and avoid unnecessary additional costs to the sector and ultimately consumers. We are ready to take action in the event that suppliers fail to comply.”

Igloo Energy and two other small suppliers on Wednesday became the latest companies to fold, with more than 225,000 additional homes due to be transferred to new providers.

Matt Climo and Henry Brown, founders of Igloo, announced that the company will stop trading, saying that the market is “unfortunately no longer sustainable for Igloo.” Symbio Energy and Enstroga also collapsed.

Igloo had 179,000 customers, Symbio 48,000 and Enstroga 6000. Together they made up less than 1 percent of the market.

The UK’s retail energy sector plunged into crisis this month as it became clear that a large number of suppliers were in danger of being out of work quickly as wholesale gas and electricity prices rose above levels they could pass on to customers. With the recent departures, at least 1.7 million customers have lost their suppliers in the past two months.

UK natural gas prices are trading near £1.80 for heat, three times higher than at the start of the year amid fierce competition for supplies globally.

The sector has sought a rescue package from the government, but Business Minister Kwasi Quarting has ruled out bailing out any company and said the broader sector should first try to resolve the situation through existing operations.

Ofgem helps allocate orphaned clients through its so-called provider of last resort system, which transfers them to new providers. But there are questions as to whether this will still be possible with more and more companies dropping out, given that most customers incur losses to suppliers at current wholesale prices.

At the moment, there is a difference of more than £500 between the amount suppliers are allowed to charge under the UK’s annual price cap, which rises to £1,277 from October, and the cost of purchasing power, which is close to £1,800 for new customers currently. total price.

Any customers who were on cheaper deals at a fixed rate could see their bills rise by hundreds of pounds to the maximum price level.

The potential cost to other families of bailing out failed energy retailer customers is also in the spotlight.

Research published by Investec this week suggested that the cost of rescuing 1.5m customers whose suppliers went bankrupt before Wednesday could translate to every household paying for both electricity and gas in the region of £30 each.

ihatetrump

Stable door, horse, bolted

Unfortunately, to use your analogy, the stable door is still wide open and swinging in the wind - there's little doubt there  will be more to come.

You'd like to think that in a multi billion pound sector such as Energy, OFGEM would have a Finance & Compliance arm that regularly reviews financial compliance and establishes corporate governance with any company that holds a licence to supply. 

It really beggars belief that a father and 22 year old son with no apparent sector experience could set up a licenced energy supply company with £100, drive it to achieve sales approaching £390 Million  (2019 numbers - likely more by now) lend money to unrelated (within the sector) companies that they also owned and OFGEM either wasn't aware or didn't care.

AVRO was built entirely using customer advance cash while at the same time attracting more and more because it sold energy at cost with no margin whatsoever. OFGEM should have been reviewing this regularly and been aware that the business model was not sustainable.

The auditors were hoodwinked/coerced into signing accounts in 2019 that had red flags all over them - all without question or oversight from OFGEM.

Stinks to high heaven - hopefully the SFO will get involved and dig very deep.

ihatetrump

The administrators for Avro have issued their proposal - filed on Companies House.

How deeply AVRO  were in the do-da is reflecting in this eye watering comment in their report:



£258 million !!!!!!!! - not even their gullible customers could stump up that amount.....