Legal experts are warning investors not to buy worthless carbon credits as directors of two firms involved in scams were closed.
In both separate cases, the directors were disqualified for selling voluntary emission reduction certificates (VERS) to consumers as investments, even though they knew their customers had no way to make a profit from the purchase.
VERS are certificates showing a business has paid some money to offset their carbon footprint.
Investors have no market where they can sell a VER.
“The truth is that the VERs were impossible to resell, making them worthless as investments,” said Anthony Hannon, Official Receiver in the Public Interest Unit of The Insolvency Service, who investigated both cases.
10 banned for a total of nearly 90 years
In the latest case, three directors of the company Cleartrade were disqualified from holding office for 15 years each at London’s High Court for their part in a £1 million VERS scam.
“This company’s claims about the profits to be made by buying its carbon credits were quite simply untrue and only the company and those working for it made money,” said Hannon.
In a long-running carbon credits scam investigation involving a company called World Future Ltd, four directors have been banned as directors for a total of more than 42 years.
The investigation revealed that between June 2011 and March 2012 World Future sold VERs to consumers as investments and netted at least £2,484,500.
“This company held itself out as having extensive expertise in the carbon credit market and made bold claims about the potential returns available when investing in carbon credits,” said Hannon.
No profit ever made by investors
“The directors and salespeople had no such trading experience and were only able to make sales based on systematic misrepresentations about the VERs they sold.”
Carbon credits are certificates that allow the holder to emit 1 tonne of carbon dioxide. The certificates can be traded, but only in high volumes generally outside the reach of individual investors.
Consumer watchdog the Financial Conduct Authority (FCA) has issued a warning explaining that no investors have ever reported making a profit from carbon credits.
“This supports our view that there is not a viable secondary market for ordinary investors to sell or trade carbon credits, despite claims and promises made by many firms, advisers and brokers promoting and selling them as an investment,” says the FCA.
“We have also received reports that an increasing number of firms are using dubious, high-pressure sales tactics to sell carbon credits to investors.”