Ponzi scheme with ‘nerve centre’ in Ireland collapses with 1,800 Irish victims

‘Regulatory failure of dramatic nature’ after property firm went bust owing €3 billion

The Central Bank was aware of, but failed to act on a German ponzi property scheme that had its “nerve centre” in Ireland, the Dáil has been told.

The company involved collapsed last year with 1,800 Irish victims facing losses of up to €108 million.

Sinn Féin finance spokesman Pearse Doherty claimed that "regulatory failure of a dramatic nature" was at the heart of the scandal.

He made the claim as he highlighted a fraud investigation by German authorities into Dolphin Trust and its director Charles Smethurst. The firm was renamed as the German Property Group (GPG) and owed about €3 billion to some 20,000 investors around the world when it collapsed.


As the investigation ramped up last month, the Central Bank confirmed Irish investors had no recourse to its investor compensation scheme, as the products sold by GPG were not regulated. The bank said that expanding its role is a matter for the Oireachtas, but that brokers must clearly inform clients when they are being offered unregulated products.

Mr Doherty said the investors were ordinary people, some of whom had invested life savings of €20,000 to €40,000 in the company which had its “nerve centre” in Cork. Associated companies in Naas, Co Kildare were co-owned by Mr Smethurst and two Irish directors.

Loan notes were marketed and processed by a company called Wealth Options Trustees Ltd from 2012, he said.

In the period that followed, the directors received over €9 million and they paid themselves over €4 million in 2018 when the scheme was unravelling, he said.

Dolphin Trust told investors it would buy derelict buildings in Germany, turn them into luxury flats and sell them to German buyers with high interest returns, he said.

But investors’ money “was used by the director and his family to pay for parties, fashion shows, luxury items and rent”.

One investor looked at the property folio number which turned out to be a German army base, he said.

Mr Doherty said the Central Bank contacted Wealth Options in 2016 and asked it to provide details of the products it was selling.

“In other words, the Central Bank was aware of the risks as far back as 2016 - indeed, it was reported at that time - of these high-risk, unregulated products that were compromising peoples’ pensions and savings.”

However, Mr Doherty asked why no action was taken and why the Central Bank did not alert people through a notice on its website that there was an issue, when it had been reported in Irish media.

“It was even after this time that the sales of these loan notes went through the roof. At the heart of this scandal is regulatory failure of a dramatic nature,” he said.

The Central Bank regulated Wealth Options and the brokers who sold the products but not the products themselves. “This is the wild west of financial market, with no sheriff in sight. And now we have 1,800 Irish people that may not recover their pensions or their life savings,” he said.

Mr Doherty added that hundreds of millions of euro worth of pensions are invested in other high- risk loan note products. He asked what action the Government would take “to bring this market into the light and these products under robust regulation”.

Tánaiste Leo Varadkar said he was "not aware of all the facts, or even many of the facts" in the case.

Mr Varadkar, who is Minister for Enterprise, expressed sympathy for investors in Ireland, and across Europe, who had lost money.

He stressed, however, that the Central Bank, as the regulator, is independent of Government and it was not possible for him to answer questions on its behalf. “But I’m sure it will answer questions in due course,” he said. “I will certainly inform the Minister of Finance, that this was raised here in the Dáil.”

Marie O'Halloran

Marie O'Halloran

Marie O'Halloran is Parliamentary Correspondent of The Irish Times