A UK court has wound up a company it says misled private investors by comparing near worthless carbon credits to gold, the latest in a string of firms found to market poor quality offsets to the general public in a practice that financial regulators say has grown exponentially in the past 18 months.
At the High Court in London on Wednesday, the UK government was successful in its request to liquidate Tullett Brown, a firm it said made 1.6 million pounds by misleading customers into buying unregulated credits at almost four times what it paid for them.
Last month, another probe by the Insolvency Service prompted the High Court to shut down a web of companies that it says made 6.5 million pounds by mis-selling land and carbon credits and were linked by the name Manor Rose.
The business practice often involves cold-calling and misleading private investors into thinking they were buying U.N. carbon credits that can be used by governments and companies to meet legally-binding emission reduction targets.
In fact, the credits offered were not regulated by the U.N. and were unlikely to meet future price projections for U.N. credits that the sellers portrayed in glossy marketing brochures from banks such as Barclays.
No-one from Tullett Brown was willing to comment on the record, but a former employee denied portraying the credits as U.N.-issued units, but did admit some employees had no experience whatsoever in financial markets.
“It’s an unregulated market, so many people trading are themselves unregulated,” he said on condition of anonymity.
Despite lacking many powers to stop the firms from marketing voluntary credits, the UK Financial Services Authority is concerned about the rise in the practice.
“We suspect that many of the firms and individuals who were previously selling land are now selling carbon credits. The figures appear to support this,” said Jonathan Phelan, an official with the Financial Services Authority.