OffshoreAlert
Daily news, documents and intelligence about Offshore Financial Centers and those who conduct business in them that you will not find anywhere else.
Author Photograph
David MarchantEditor at OffshoreAlert
Full Bio

Axiom Fund: Investors making one mistake after another

December 17, 2012 by David Marchant

Investors in Axiom Legal Financing Fund have until Wednesday to try to block the appointment of KPMG's Kris Beighton and John Milsom as Receivers. Once KPMG is ensconced, it will be extremely difficult, perhaps impossible, to have them removed. For investors, it's time to put up or shut up.

According to someone who attended Axiom's Extraordinary General Meeting in London on December 11, investors were informed that, since appointing KPMG in mid-October to investigate OffshoreAlert's allegations against Axiom and its investment manager, Tangerine Investment Management, Axiom's directors, Ronan Guilfoyle and Graham Hampson, had spent $1.3 million on the investigation at a rate of about $165,000 per week.

Despite such massive expenditure, KPMG still doesn't know that Axiom perpetrated a massive fraud against investors judging by the eight-page Receivership petition that was filed by Guilfoyle and Hampson at the Grand Court of the Cayman Islands and, as such, the directors are wastefully racking up professional fees by going through the unnecessary step of having Receivers appointed, instead of liquidators.

For now at least, investors are expected to believe that "mismanagement", not fraud, is to blame for Axiom's collapse and that the Fund was not operated as a Ponzi scheme, despite overwhelming evidence that it was which was obtained by OffshoreAlert at a fraction of the cost of KPMG's investigation. Perhaps I shouldn't be surprised they haven't spotted the obvious since it is evident from the petition that – incredibly – the Fund's directors and their advisors don't even know what a Ponzi scheme is.

To wit, it was stated in the petition that: "The allegations made against Tangerine [by OffshoreAlert] included fraud, embezzlement of funds by individuals associated with the investment manager, and that the Portfolio has been operated as a 'ponzi scheme'. This allegation is understood to mean that the Portfolio had not invested any funds of Investors in any realisable assets. Investigations commissioned by the directors in response to those allegations carried out by KPMG, with advice from K&L Gates, have confirmed that the Portfolio is not a ponzi scheme in the sense set out above, in that loans have been made to the Panel Law Firms and those law firms are conducting genuine cases."

There are at least two things wrong with this statement.

Firstly, OffshoreAlert never reported, nor implied, that none of Axiom's funds had been invested in "any realisable assets". In fact, OffshoreAlert specifically reported that tens of millions of pounds were loaned to British law firms but pointed out that the majority of investors' funds were stripped out by Fund principal Timothy Schools and other insiders both before and after the loans were received by the law firms and that many of the litigation cases that were actually funded out of what little of investors' money remained were, as one OffshoreAlert story put it, "either fraudulent or hopeless causes".

Secondly, whether or not Axiom invested in "any realizable assets" is irrelevant to whether the Fund was a Ponzi scheme. Many Ponzi schemes have some level of underlying business operations, e.g. those operated by Allen Stanford and Bernard Madoff. What makes a scheme a Ponzi is when redemptions are paid not out of profits from underlying business activity but from new investors' money. In Axiom's case, there were no profits, so redemptions were clearly paid out of new investments, thereby making it a Ponzi scheme. None of this is rocket science. For Guilfoyle, Hampson, Beighton, Milsom and whoever at K&L Gates is advising them not to know something as basic as this is like a World Cup Final referee not knowing the offside rule. FIFA would, of course, never appoint such a referee. The same cannot be said of Axiom's directors.

As I have stated before, I've investigated and exposed a lot of frauds over many years, several of them a lot bigger than the £117 million-odd Axiom scam. My success rate is 100%. But I've never come across one that had so many so-called legitimate offshore firms providing services, all of whom will have bona fide insurance policies and are now sitting ducks for eventual liquidators to recover damages from given the extraordinary level of incompetence, negligence and/or willful blindness.

Investors need to understand that it is counter-intuitive to allow Guilfoyle and Hampson to decide who liquidates Axiom and, therefore, who they will have to negotiate with to settle their personal liabilities to the Fund, which are potentially massive. KPMG might do a decent job but why take a chance, particularly given that KPMG still doesn't even know that a fraud has been committed?

What makes sense is for investors to have their own liquidators appointed (forget about wasting money appointing Receivers). At least then, they will have the comfort of knowing for sure that the liquidators are truly independent and, therefore, more likely to pursue the directors, fund administrators, auditor, and others aggressively in order to achieve a greater recovery.

Common sense, however, seems to be in short supply among investors, which might explain why they're in this pickle in the first place. This might seem harsh but I'm just telling it like it is.

eMail Alerts  

Sign-Up for eMail Alerts

 Average 4 out of 5

OffshoreAlert encourages lively, open debate and asks that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.


POST A COMMENT

We hunt for red flags in high-value, cross-border finance by monitoring offshore and onshore courts, regulatory actions, offering documents, and other sources - and email you the results.

View Recent Digests

ALL ARTICLES  
Cayman crypto firm ICOBox sued by US regulator for 'unregistered' activity
Cayman Islands cryptocurrency "incubator" ICOBox and its founder, Nikolay Evdokimov, have been sued by the U.S. SEC for alleged illegal involvement in digital token offerings that raised $665 million. In a separate lawsuit last year, a former CEO of an ICOBox subsidiary claimed the group's "main shareholders" were "all funded by Russian money laundered through bitcoins and other cryptocurrencies".
LATEST ARTICLES & DOCUMENTS