Top Fraudsters and Financial Crimes of 2019 in the UK

Eco-investment scheme tops list of more than 600 convicted frauds.

UK tax authority HM Revenue and Customs (HRMC) has issued its annual report of top financial crimes of 2019, while also boasting that its fraud investigations have led to more than 600 people being convicted for their part in tax crimes during the past year.

One of the most notable cases in 2019 was the arrest of five men who lured individuals to invest in a fake eco-investment scheme as a tax break for wealthy investors. The £107.9 million ($142.1 million) fraud was one of the UK’s biggest tax crimes, said HRMC. The men had claimed that the money was being invested in carbon emission reduction certificates, which are intended to help countries meet environmental emissions targets set by the United Nations.

The money was diverted, however, to purchase properties in the UK and Dubai. The men were sentenced to more than 43 years in prison and ordered to pay £20 million or serve another 39 years in prison.

In another case, two “professionals” running the ironically named Ethical Trading and Marketing Ltd. were jailed for more than 14 years for attempting to steal in excess of £60 million through a fraudulent tax avoidance scam that falsely claimed to invest in HIV research and conservation. The two allegedly enticed wealthy investors with the promise of tax breaks through the support of tree planting in the Amazon and research into a HIV cure.

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The men created false documents to fraudulently claim expenses and submitted fake scientific reports to HMRC and photos to support their claims. But there was no evidence the tree planting or HIV research had taken place. The pair were helped by Professor Ian Swingland, a world renowned conservation scientist, who joined the fraud to create the fake documents and add credibility to the scheme.

“This was a calculated and cynical crime carried out by men who had no shame in using a worthy cause like HIV research to mask their criminality,” Simon York, HRMC’s director of Fraud Investigation Service, said in a release.

Swingland, who founded the Durrell Institute of Conservation and Ecology at the University of Kent, was stripped of his Most Excellent Order of the British Empire (OBE) award due to his involvement in the crime.

The HRMC also cited its work with Interpol to break up a Europe-wide crime ring involved in money laundering as well as drug and cigarette smuggling that accumulated an estimated €680 million from their crimes between 2017 and 2019.

More than 450 police and customs officers in Spain, Poland, Lithuania, and Estonia carried out raids targeting members of the criminal network, which led to another 18 arrests across Europe. More than 40 properties were searched, which led to seizures of €8 million in cash, diamonds, gold bars, jewelry, and luxury vehicles, as well as a “substantial quantity” of illicit drugs and cigarettes.

“These prosecutions clearly show that we’ll relentlessly pursue those criminals who would try and cheat honest taxpayers,” said York. “It means we’re increasingly taking on ever more complex frauds and well-resourced opponents, including tackling organized criminals who would otherwise undermine our economy and harm our communities.”

More Hedge Funds Close in 2019 than Opened

As stocks soared in 2019, the funds saw investor exoduses amid lackluster returns.

By Larry Light

A common complaint: There are too many hedge funds. If so, that is in the process of being corrected. For the fifth straight year, the $3.2 trillion industry suffered more fund closings than launches, according to Hedge Fund Research.

During the past five years, more 4,000 hedge funds have been shuttered, leaving the count at less than 9,000 by most estimates. Big stars like Jeff Vinik and Louis Bacon closed their funds, to the shock of the entire industry.

Vinik, the former Fidelity Magellan chief, is returning money to investors. His funds were up a little over 4%. Vinik told clients it was more difficult nowadays to raise money. Veteran hedge operator Bacon—he’s been at this for more than three decades—logged a performance, he said is a letter to clients “in the low single digits.”

Indeed, the earlier enthusiasm for starting hedge funds seems to be waning. The number of launches last year was the second smallest this century.

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The smallest was 328 in 2000, a recession year and one where the dot-com bubble burst. That is 60 below 2019’s tally. One glimmer of good news was that in November, the trend reversed, at least for the moment, with a net of $4.5 billion coming into the industry.

At the same time, investors pulled $81.5 billion out of these vehicles in 2019 through November, eVestment data show. A big reason is that the funds, on average, have failed to keep pace with the S&P 500 in a roaring bull market, the Bloomberg Global Hedge Fund Index indicates. The funds had a strong first half but sputtered in the second half. They ended up gaining around 7.8% last year, less than one-third the broad-market index’s performance.

Hedge fund defenders say that these investing pools aren’t meant to best the stock market, but rather to be a buffer for when stocks tumble. More significantly, the industry’s advocates argue, is that the one-time clamber to get into a hot area has brought in a lot of marginal players who drag the average return down.

Assuming hedge funds’ inventory drops to a sustainable level, with the weaker names gone, the category may well look better as a whole. Certainly, some funds deliver eye-popping results, such as the four-year-old Singapore-based Vonda Global Fund, which almost quadrupled in value in 2019. It did so by diving into the combustible world of exchanged-traded futures, covering everything from commodities to government bonds to equities. It helped that those asset classes had positive returns for the year.

The fees structure of hedge funds definitely gives an advantage to their managers’ incomes, with 2% in annual management levies and 20% of any profits (many funds, desperate for investors, charge 1% and 10%). Plus, this is an investment segment that is endlessly inventive. For instance, hedge funds dedicated to cryptocurrency are springing up, with more than 200 in operation today, 10 times the number from five years ago.