Savers ruined by toxic £1.5bn scheme

British pensioners have been ‘deliberately cheated’ by a failed property investment. Jessica Beard investigates

Thousands of British savers have been pushed to the brink of financial ruin after placing their money into a toxic German investment scheme that later collapsed.

More than £1.5bn has been invested in German Property Group, more commonly known as Dolphin Trust, but the firm, which sold loan notes to fund the purchase and renovation of derelict German buildings, filed for bankruptcy last July. The group lured investors with the promise of annual returns of 15pc and said a £100,000 investment would return £60,000 within five years.

However, payments began defaulting in 2018 and British investors now fear their life savings could be lost altogether. The German Property Group Creditors Association, a group of British investors, said £320m of Britons’ cash was invested in the scheme, making it larger than London Capital & Finance, another bond scheme that collapsed owing investors millions.

A document seen by Telegraph Money, written by the insolvency administrators, said the German Property Group “gradually developed into a pyramid scheme”. The founder, Charles Smethurst, is accused of trying to “cover up, delay and obstruct” the investigation. The insolvency administrators found in some cases funds were raised for projects which never went ahead. In another email seen by this newspaper, Wolfgang Kubicki, a senior German politician, said he received a confirmation from Mr Smethurst that “British investors were deliberately cheated” as the failing firm continued to lure in victims. A letter written by Mr

Smethurst’s lawyer, sent to Mr Kubicki, said: “Approx €100m [£87m] was raised in 2019, which was a big mistake considering the knowledge of the economic situation at the end of 2018.” The letter said “in no way” did Mr Smethurst’s actions intend to harm investors. Mr Smethurst’s lawyer was contacted by Telegraph Money but did not comment.

Dawn Palmer, 68, from Oxfordshire, whose name has been changed, has lost £80,000 in failed investment scams, half of which was to the Dolphin scheme. Ms Palmer invested £40,000 of her mother’s inheritance into the German business after an “introducer” had assured her the investment was “secure and guaranteed”. Ms Palmer was wrongly told the investment was suitable as she was a “high net worth” investor, despite only investing £40,000. She asked for her money back in 2018 but never received anything.

Ms Palmer said she felt let down and abandoned by the City watchdog, the Financial Conduct Authority, as she waits to hear if her inheritance is lost.

She said: “I have felt sick about it for a year and a half, but I can’t let it ruin my life. But it is utterly disgusting. I feel completely unprotected by the FCA.”

The GPG Creditors Association added: “The FCA is not fit for purpose in its current form. These investments should not have been allowed to be marketed to the general public.”

Labour MP Alison McGovern said she had raised the issue with the FCA. David Johnston, a Conservative MP, has also written to the Serious Fraud Office, which would not confirm nor deny whether it would open an investigation.

Andy Agathangelou, of the Transparency Task Force, a campaign group, slammed the British authorities’ inaction and called for a formal investigation. He said: “With one scandal after another, we are witnessing the corrosion of the competence, confidence and credibility of the financial system.”

A spokesman for the FCA said: “German Property Group is a German company and is not authorised by the FCA. However, we are aware that a number of UK consumers may have invested in GPG either directly or via a selfinvested personal pension scheme.”

The watchdog urged any investors to contact the firm that advised them or their Sipp operator and ask the Financial Ombudsman Service to investigate.