High Court orders £1.2 million fancy coloured diamond scam into liquidation
A London diamond broker targeting vulnerable investors and mis-selling them fancy coloured diamonds for investment at inflated prices has been ordered into liquidation following a petition presented by the Secretary of State for Business, Innovation and Skills to wind up the company on grounds of public interest.
The petition was issued following confidential enquiries carried out by Company Investigations, part of the Insolvency Service, under section 447 of the Companies Act 1985, as amended.
CDX Worldwide Ltd trading as the Coloured Diamond Exchange claimed to sell the most sought after investment grade stones in the world and that
its mission was to provide investment opportunities which have been largely unavailable to private investors” and how “prices have gone in only one direction – upwards, at approximately 15-25 per cent year on year.
The company rented virtual office services at 1 Royal Exchange Avenue, London, EC3V 3LT and operated a website www.coloureddiamondexchange.com.
The ‘contact us’ section of the former website directed people to a company having a similar name registered in the United Arab Emirates.
The Court heard how fancy coloured diamonds were marketed and sold to the public as an investment opportunity using cold calling techniques. In some instances investors were falsely told that the company had been trading for over ten years, that it was FSA/FCA registered and “was part of the Royal Exchange”.
The company’s sole recorded officer, James Gilkes, informed the investigation that the company’s day to day business was outsourced to a marketing company run by a Sean McDermott but was either unable or unwilling to provide any details of the marketing company other than it was based in Dubai.
Investors were sold coloured diamonds for investment at mark ups of over 550% but afterwards were unable to make further contact with the company.
Welcoming the Court’s winding up decision Chris Mayhew, Company Investigations Supervisor, said:
This pressured sales operation was yet another scam outfit making false and misleading statements to persuade people to make near worthless investments.
We all need to be more cynical when it comes to the representations made by these pernicious schemes – today the Royal Exchange in the City of London is a retail and office centre, not a commodities exchange as falsely held out to vulnerable investors who were persistently and aggressively targeted by this company and callously deprived of their savings for the benefit of those behind its dishonest activities.
We work closely with a number of partners to prevent unscrupulous companies fleecing the vulnerable and the Insolvency Service will continue to investigate and bring to a halt the activities of companies harming or about to harm the public by operating in this way.
Notes to Editors:
CDX Worldwide Ltd (company registration number 08239679) was incorporated on 04 October 2012. The registered offices of the company have been:
- Lansdowne House, City Forum, 250 City Road, London, EC1V 2PU from incorporation to 29 November 2013
- 40 Gracechurch Street, Iplan, London, EC3V OBT from 29 November 2013 to 15 December 2014
- 48 High Town Road, Luton, Befordshire, LU2 ODE from 15 December 2014 to present date
The sole recorded director of the company throughout is shown to have been James Alexander Gilkes. No company secretary is shown to have been appointed.
Mr Gilkes is shown to be the sole £1 ordinary shareholder of the company.
Abbreviated unaudited accounts shown to be approved by Mr Gilkes for the year ending 31 October 2014 report total assets of £13,021 (previous year £117,045); creditors of £19,487 (previous year £63,061) and a loss for the year of £60,450 (previous year profit £53,984).
The company’s former website www.coloureddiamondexchange.com contained spelling mistakes and the page “What are fancy coloured diamonds” was identical to other broker companies including Adamus Compendium Ltd (company number 07896423) which was placed into voluntary liquidation on 18 February 2015 having a reported deficiency of £6,428 with Nedim Ailan of 142-148 Main Road, Sidcup, Kent, DA1 6NZ appointed liquidator.
The petition to wind up CDX Worldwide Ltd in the public interest was presented in the High Court on 4 December 2015.
The public interest grounds for winding up the company were its lack of commercial probity by participating in a wider scheme involving the sale of fancy coloured diamonds to the public for investment and making false and unfounded statements, its lack of transparency, and abandonment.
In ordering the company into liquidation on grounds of public interest on 9 March 2016 Mr Chief Registrar Baister said:
… there has been no response by the company to the petition which is unopposed … one of the grounds alleged by the Secretary of State is a lack of commercial probity … essentially this concerns a well known method of taking money from members of the public … such investments never seem to realise a profit … other grounds relied upon are a lack of transparency and abandonment … the director of the company, Mr Gilkes, professes to have very limited knowledge of the company’s affairs … put bluntly he looks as though he was a stooge … the abandonment and lack of clarity is exacerbated by Mr Gilkes coming out of his role as a stooge to make an application to strike off the company at Companies House … the evidence shows that unfounded and misleading statements have been made to persuade people to invest … the available records show there were 77 sales to 49 individual investors totalling just over £1.2 million … the website contained the usual puffs about the quality of the diamonds being marketed …. an important representation made was that each and every diamond could be seen in the market as a good and rising long term investment … and much more in that vein … the petition is unopposed and it is sufficient for me to refer to paragraph 24 of the petition which summarises the objectionable statements made … the information investors provided appears to confirm that the company never actually achieved a success in selling any of the diamonds on behalf of investors … so the extravagant claims made have not been made good … there are all the usual complaints I’m afraid of the type of business this is … plainly it is right that the company should be wound up and I do so order.
Company Investigations, part of the Insolvency Service, uses powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK on behalf of the Secretary of State for Business, Innovation & Skills (BIS). Further information about live company investigations is available.
The London Diamond Bourse has published consumer advice developed with the Insolvency Service with the objective of preventing the public falling foul of “boiler room” scams purporting to sell highly lucrative investment diamonds. The advice can be found in the public area of the London Diamond Bourse website.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice. Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
By virtue of the appointment of the Official Receiver all public enquiries concerning the affairs of the company should be made to: The Official Receiver, Public Interest Unit, 4 Abbey Orchard Street, London, SW1P 2HT. Telephone: 0207 637 1110 Email: firstname.lastname@example.org.
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Published: 24 March 2016
From: The Insolvency Service