The High Court has wound up seven companies run from an office in Mayfair after an investigation found that their marketing of high-risk mini-bonds was misleading.

The Insolvency Service investigation found that their marketing of high-risk mini-bonds, used to fund property development projects, was misleading and the directors continued to take investors’ money even after the companies were insolvent.

In the case reminiscent of the collapse of mini-bond provider London Capital & Finance (LCF), the Manga Group includes four unregulated mini-bond investment vehicles (Magna Investments X Ltd, MIX2 Ltd, MIX3 Ltd and MIXG Ltd), an associated group and brand holding company (Magna Asset Management Ltd), an operational company (Magna Project Management Ltd), and a consultancy/administration company (MIX Ops Ltd)

The four unregulated mini-bond investment vehicles had raised over £20m from members of the public.

The principal directors of all the Manga Group companies were Christopher John Madelin and Oliver James Mason.

All were incorporated between December 2014 and March 2019, and were registered at the same address in Berkeley Square in Mayfair, London.

Over 11,600 investors put money into what they believed were relatively safe bonds before the collapse of failed £236m mini-bond firm London Capital & Finance in January 2019. It was the first high profile case of its kind and led to investigations into the Financial Conduct Authority (FCA)’s regulation of mini-bonds.

The FCA apologised for its handing of the collapse of LCF in a statement made in April. The FCA was roundly criticised for its handling of the LCF fiasco by the Dame Gloster Report into the collapse. 

The FCA recently banned the mass-marketing of mini-bonds to retail investors, following serious concerns that they were being promoted to investors who neither understood the risks involved, nor could afford the potential financial losses. 

The Insolvency Service investigation into the Magna group of companies discovered that marketing of the mini bonds was misleading, with marketing material overstating both the levels of security being offered and the true protections offered to them from the appointment of a ‘Security Trustee’.

Mr Madelin and Mr Mason, having secured deposits from investors, are believed to have been the beneficiaries of £2.5m through director loan accounts.

MIX3 and MIXG took over £2m in deposits from loan note creditors between 1 December 2019 and 25 February 2020, a period when the directors ought to have known that all of the companies were insolvent.

MIX2 had, by then, failed to pay its loan note holders when due, leading to a Default Event in all 4 MIX to MIXG Loan Note Instruments.

During this period, however, the directors paid themselves £425,021 with a further £370,471 lent to a non-UK company of which they were shareholders.

The companies were all wound up on 10 August and the Official Receiver was appointed liquidator.

Edna Okhiria, chief investigator at The Insolvency Service, said: “Investors in the MIX companies were systematically given false comfort that their investments were to be “asset-backed” by tangible “bricks and mortar” security when in reality this was not the case and highly misleading.

“Marketing and publicity material circulated to investors presented a false picture of the Group’s strong financial health and the companies induced investors to invest over £2 million after December 2019 at substantial risk, with the knowledge it had stopped repaying existing investors and therefore there was no reasonable prospects of repaying these sums.

“Investments in speculative mini-bonds are inherently high risk and the FCA has banned their mass-marketing to retail investors.

“The Insolvency Service has acted, applying to Court for the group of companies to wound up in the public interest to protect others from becoming victims and to send a strong message to like-minded perpetrators that behaviour of this nature will not be tolerated.”