Mini-bond firm under scrutiny by fraud police

By Jessica Beard

Police have begun examining evidence against failing property investment firm The High Street Group, as a damning report warned investors were unlikely to get any money back.

DIY savers invested more than £50m in “loan notes”, also known as mini-bonds, on the promise of 12pc returns per year. However, Action Fraud, a government scam prevention agency, has now opened a case file with Northumbria Police’s fraud team, to probe financial misconduct, Telegraph Money can reveal.

In addition, two subsidiaries of the group – Kent Street Limited and High Street Residential UK Limited – have filed for insolvency with administrators SKSi and James Cowper Kreston taking charge.

Telegraph Money first investigated the group’s problems in August

The financial status of the group has also been called an “absolute mess” by Broadleaf, a mini-bond specialist. In a report seen by this newspaper, the firm warned investors “would get nothing”.

The report, commissioned by a group of investors to investigate their claim, also added: “It [owns] shares in its subsidiaries and there is real uncertainty as to the value of those subsidiaries.”

Ordinary investors would also fall to the back of the queue and were unlikely to get any money back whether the company collapses or not, the report warned.

A High Street Group spokesman said Broadleaf’s report was “without substance” and made “sweeping unaudited statements”. The £1.5bn investment group has continued to raise money from investors in order to fund property development projects in the north of England and the Midlands, claiming they would generate large profits.

However, the group first defaulted on interest payments in 2019. In June this year, the company passed an unusual stakeholder vote to block investors from redeeming money early, despite a guarantee bondholders would have access to investments in full, every year.

The group also lost its second auditors in a year last month.

Haines Watts resigned and warned creditors that the group had failed to pay its fees. Former auditors PwC resigned in September 2020 after The High Street Group failed to provide “accurate and timely explanations”. PwC said the firm was not “sufficiently robust” for a reliable audit.

‘I am desperately worried about keeping the roof over our heads. I’m trying not to give up’

Broadleaf’s report also warned investors about “alarming” decisions from directors to “hive off” parts of the group as separate entities.

Last year, directors of the limited company, known as The High Street Group Limited, set up a separate entity, The High Street Group plc. Days after this newspaper’s initial investigation in August, the group was rebranded ­Hadrian Real Estate.

Investors have continuously been unable to access their savings or receive interest payments they were due. Timmy Stoves*, 64, who is terminally ill, invested his life savings and pension in The High Street Group hoping to leave a lump sum and steady income behind for his wife and daughter. “That’s all been blown to smithereens,” he said.

Mr Stoves, who cannot work due to his illness, has been relying on the interest payments as his main source of income. However, £70,000 has not been paid over the last year after the group defaulted.

“My income never came through and I have no way to supplement it. I have borrowed extensively on personal loans, credit cards and from our friends.

“I am desperately worried about keeping the roof over our heads and feel as though I have given away my wife and daughter’s future.

“It’s hard to take emotionally and I’m trying not to give up. But I have to look after my family,” he added.

Mr Stoves invested a six-figure sum when he fell ill after being promised a 10pc return.

The High Street Group previously confirmed it had created a relief fund to cover exceptional situations.

However, Mr Stoves has not benefited. A spokesman said: “We are working to gather funds for vulnerable investors and hope to have a resolution for [Mr Stoves] by the end of this month.”

The investor fears he will lose his home. He added: “We will have to sell up and move into a static caravan. I can’t sleep. We have nowhere to turn and the City regulator does not want to get involved.”

The Financial Conduct Authority did not respond to repeated requests for comment from this newspaper.

While it does not oversee unregulated investments, such as loan notes and mini-bonds, it has previously issued warnings on similar property investments.

Edmond de Rothschild REIM, a real estate business, has written a letter warning against The High Street Group, claiming it had circulated false information to investors and created “obvious misrepresentations”.

A High Street Group spokesman declined to comment on the accusations.

Worried investors formed a support group after they could not contact anyone at the group. Curtis Kitchin*, 58, invested his £190,000 pension eight years ago and now fears it has all been lost.

“We’ve had so many excuses over the years about why it hasn’t paid out. You work for that money and have plans for it; now, we have to rethink everything,” he said.

Mr Kitchin said he was owed £240,000 when accounting for the interest. He invested via an independent financial adviser, who is no longer trading.

The High Street Group has previously tried to silence investors from speaking to this newspaper about the company’s cash flow problems, with some claiming they received “aggressive” phone calls from senior staff.

Related Posts