Brokers form action group for investors hit by German ‘pyramid scheme’

Some 40 financial broker firms whose clients were among over 1,800 Irish investors hit by the collapse of Hannover-based German Property Group (GPG) have set up an action group to deal with the liquidator of a Dublin vehicle linked to their investment as they seek to recover some of their money.

“Until recently, individual firms have been working with their clients alone, but it was thought that a collective approach would be a more effective and efficient method of pooling information, and resources, which would better assist investors in their quest for redress,” the so-called GPG Redress Group said on Thursday.

"The GPG Redress Group has been set up to support investors by engaging on their behalf, where authorised and appropriate, with all connected parties to the investment, including the Liquidator, the Pensions Authority, and the Department of Finance, among others," it added.

GPG, formerly known as Dolphin Trust, collapsed last year after taking €1.5 billion from investors in the Republic, the UK, Asia and elsewhere since it was set up by businessman Charles Smethurst in 2008.

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GPG had raised €107 million from Irish investors by way of issuing loan notes, an unregulated product, for the purpose of buying and renovating listed buildings in Germany with promises of annual returns of as much as 15 per cent. The first signs of defaults on interest payments on the Irish notes occurred in late 2019.

Wealth Options Trustees Limited (WOTL), based in Naas, Co Kildare, acted as administrator and distributor in Ireland for the loan notes, which were sold to investors through a network of brokers.

When GPG collapsed last year it was sitting on 70 properties, mainly run down and not developed, according to a report submitted to the Bremen bankruptcy court by a preliminary insolvency administrator, Gerrit Hoelzle, last October.

“The originally pursued business model collapsed years ago,” Mr Hoelzle said. “Obviously as a result of the increasing financial shortage, the business model, which was initially focused on real estate transactions, gradually developed into a pyramid scheme.”

Special purpose vehicles

The Irish investments were channelled to the German group through two special purpose vehicles (SPVs) – MUT 103 and Dolphin MUT 116. MUT 103 was put into liquidation last month. The extent, value and ability to enforce security against German property has been called into question by lawyers hired by WOTL as GPG imploded.

“GPG investors were offered an investment based on a clear understanding that monies invested would only be transferred to Germany when full and adequate security, in the form of German Listed Buildings, was in place,” the action group said.

“This process was outlined in ‘Investors Memorandum’ provided to investors in advance of their commitment and also in numerous product brochures, booklets and communications.”

The GPG Redress Group has written to the Garda National Bureau for Economic Crime to request a full investigation of GPG and how it was presented to investors in Ireland. A spokeswoman for An Garda Síochaná said: “These matters are being investigated by the German authorities. An Garda Síochaná, if requested through formal channels, will assist where appropriate.”