The US-based cryptocurrency investment firm with links to Parliamentary groups has disappeared leaving some investors out of pocket by up to £100,000.
Founded by CEO Luke Sullivan, the structure of investing with Phoenix Community Capital involved investors buying tokens of a cryptocurrency called ‘fire’, 10 of which would add up to a ‘nest’. ‘Nests’ offered a return of 0.225 ‘fire’ tokens per day meaning, in theory, investors would make back their investment in 45 days and then begin to see a profit.
According to the Guardian, who reported on the story, “seven out of every 10 fire tokens from each nest were used to pay rewards to other investors and two in 10 to invest in new crypto projects, while one in 10 went into a “liquidity pool””.
In early 2022, when PCC launched, ‘fire’ tokens were worth around £500, but by September when the firm disappeared, they had fallen to £0.50 and were continuing to depreciate. At this point, the company’s website also went offline and investors (some of whom had reportedly invested around $100,000) were no longer able to access their portfolios.
PCC founder and CEO, Luke Sullivan, has refused to comment when contacted by journalists (unless they travel to the Philippines) and all company assets now appear to have been transferred to a new business which has told PPC investors that, while it will make an effort to generate some returns, it has no obligation to them to do so.
The majority of Cryptocurrency firms in the UK are unregulated, and so individuals who choose to invest are completely unprotected by the Financial Conduct Authority (the watchdog body that regulates financial services firms and markets) if their investment goes awry.
As a result, there has been an increase in the lobbying of MPs and peers by the cryptocurrency sector, as the Government considers whether to bring the industry under the same regulations as other financial services. According to the Guardian, in the past 5 years, cryptocurrency companies have given around £250,000 to related APPGs – informal groups in Parliament made up of peers and MPs who meet to discuss subjects of particular interest.
Phoenix Community Capital gave £5,000 to the APPG on blockchain and appeared as a corporate partner on its website. Founder, Luke Sullivan was also invited to speak at an event organised by the APPG for the metaverse. Representatives for these APPGs have distanced themselves from these claims.
The rapidly growing interest in cryptocurrency has brought a similar increase in cryptocurrency-related scams and illegal trading.
Seemingly legitimate cryptocurrency investment companies use a range of selling techniques including:
- Links with well-known celebrities or public figures (often not real).
- Promises of high returns.
- Social media adverts with impressive claims about ‘quick wins’.
As the industry is largely unregulated, your money is highly unlikely to be protected by the FCA; however, if your money was transferred from a UK bank, you may be able to take action with the Financial Ombudsman Service (FOS), an independent body responsible for investigating disputes between financial institutions and consumers.
Many cryptocurrency scams occur using Authorised Push Payments (APP), an increasingly common form of fraud in which the individual being scammed is coached and manipulated into willingly making bank transfers to the scammer’s account for what they believe to be a legitimate transaction, such as making an investment.
If you lose money to a scam like this, you should immediately report the fraud to your bank, however, once the payment has been made, funds will often be moved onto another account, or access to your portfolio may be revoked, making it virtually untraceable. Depending on the circumstances, your bank may refund you, however, if you are refused compensation from your bank, then you may have a case to take to the FOS to investigate.
Sarah Spruce, Head of the Investment Fraud team at TLW Solicitors comments:
“In the case of Phoenix Community Capital, it seems that investors saw what appeared to be a legitimate cryptocurrency investment opportunity, with Phoenix representatives speaking on APPG panels and the firm featuring on APPG websites, so perhaps the red flags were harder to spot. Cryptocurrency is still widely unregulated, and if something does happen to the firm you have invested with, there is very little financial regulators, the FCA, can do to help.
However, all is not lost! Our specialist APP Fraud team can advise on an alternative compensation route with the Financial Ombudsman Service. Get in touch to see if we can help recover your losses.”
If you have used a UK bank to purchase cryptocurrency with Phoenix Community Capital, TLW Solicitors may be able to help you claim compensation.
Our expert investments team has years of experience dealing with FOS cases and will deal with your claim with efficiency and attention to detail. We understand the timescales, processes and intricacies involved in a FOS application, and our sophisticated case management systems mean you will always be kept up to date with the progress of your case.
We work on a no-win, no-fee basis, so contact us for a no-obligation, confidential conversation about your case. Call us on 0800 169 5925, email email@example.com or fill out one of the forms below.
Time limits can apply and so anyone wishing to bring a claim should do so without delay.
Meet Sarah, who heads up our experienced Authorised Push Payment Fraud Claims team.
Sarah and her colleagues are on hand to help with your claim.
- Always fight your corner.
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