Saturday 22 March 2014

Catcha Group related party fraud

Catcha Group is a private Malaysian investment company that holds stakes in several loss-making related companies on the ASX, with this cartel inflating incomes and assets with sham related party transactions. The cartel has issued millions of shares based on cooked books. The Catcha Group cartel includes iProperty Group (IPP.AX), iCar Asia (ICQ.AX) and iBuy Group (IBY.AX) on the ASX, as well as Catcha Media Berhad on the Malaysian stock exchange. The extremely poor underlying operational performance of these internet businesses is irrelevant to their use in securities fraud.


The cartel's reported net incomes have been fraudulently inflated by sham related party transactions. In September 2012, IPP sold Indonesian car sales portal Mobil123 to ICQ for scrip, recording a $2.2m book profit on the transaction. Without this related party transaction, IPP would have had twice as large a loss in 2012. In October 2013, IPP sold the ramped holding of ICQ to cartel associate Acorn Capital, making a gain of $5.0m. Without this related party transaction, IPP would have reported a loss in 2013 instead of a maiden profit of $1.7m. The reported net income of IPP is more affected by its sham related party transactions than by its operations, as a statement of fact.

Fund associates of the cartel include Acorn Capital and a group of Australian listed investment companies headed by Australian Foundation Investment Company (AFI.AX). These funds cooperate with the Catcha Group criminals to ramp the tightly held shares of the ASX-listed cartel companies IPP/ICQ/IBY, generating unrealized profits for the funds involved. The fund operators charge real cash fees based on such fraudulently engineered unrealized profits. Since inception, IPP has been ramped 15X and ICQ has been ramped 7X. In the last year alone, IPP has been ramped four times over, ICQ has been ramped three times over, and IBY has almost been doubled.


This leads to commensurate unrealized profits for cartel fund associates AFI, Mirrabooka Investments (MIR.AX), Contango Microcap (CTN.AX) and Acorn Capital. For some of these fraudulent investment companies, this scam alone accounts for a significant proportion of their yearly (unrealized and fraudulent) profit. IPP has now been ramped to the point of inclusion in the S&P ASX 300 index, allowing the criminals to pass off some the junk cartel assets to funds that are mandated to purchase such indices. The annual reports for the cartel companies contains sundry other accounting fraud. In note 23 of its inaugural financial statements, IBY reports the following goodwill for the related party "assets" it purchased in late 2013:
  • $23.8m goodwill for Buy Together Hong Kong, an "asset" contributing a $141K loss for the period.
  • $40.6m goodwill for Dealguru Holdings, an "asset" contributing a $244K loss for the period.
  • $12.1m goodwill for Dealmates, an "asset" contributing a $29K loss for the period.
IBY has total reported assets of $93.7m, with goodwill accounting for $77.6m. But don't worry, in note 12 of the financial statements the IBY directors solemnly declare they have impairment tested said $77.6m of goodwill and found everything in order. The directors do not list the assumptions necessary for reconciling their cash generating units with a $77.6m value, but since IBY's auditor signed off without remark the assumptions must of course be entirely reasonable and non-fraudulent.

Thursday 13 March 2014

Bitcoin miner listed and ramped on ASX

After ASX-listed scams run out of money, their shell can be used for another scam, with this process repeated ad infinitum and ad nauseam. It has now become standard practice for failed Australian companies to announce a splendid scrip acquisition immediately followed by a ramp. Naturally, the sudden ramps of these previously illiquid and unheralded companies is entirely engineered by related parties of the operators, it has absolutely nothing to do with a "market" outcome.

Macro Energy Limited (MEJ.AX), previously known as Verus Investments Limited, is an investment company that has a long proud track record of destroying shareholder value. Its latest half yearly report discloses remaining assets of around $3.5m, predominantly in cash, and 218m shares outstanding. Today MEJ announced it is acquiring Digital CC Holdings, which through its subsidiary digitalBTC engages in vaguely described operations involving bitcoin mining and trading.

http://www.asx.com.au/asxpdf/20140313/pdf/42nbwgj1sml1kc.pdf

The scrip acquisition of Digital CC is to be accompanied by a share consolidation, a $9m capital raising, and share options to insiders. Following the announcement, the scheme operators immediately ramped the share price of MEJ by 50%. The ramp had nothing whatsoever to do with the "market", it was a predetermined planned outcome for the illiquid share. On the previous trading day, 9000 shares of MEJ were traded on the ASX at around $0.026, for a daily trading value of around $230.


Revaluation ramps such as these have not only come to be condoned, but to be expected as part of the market. Little is known about the actual operations of digitalBTC, but what can be said with certainty is that the company is controlled by criminals who without compunction manipulate "market" prices. This in and of itself should be enough to disqualify such schemes as investments. But in Australia scamming is an accepted way to make money, as long as you succeed at it. The head of digitalBTC made his money from various adult entertainment and horoscope SMS frauds, yet is still hailed as a paragon of entrepreneurship.

http://juha.saarinen.org/2422
http://ideceive.blogspot.com.au/2006/08/phone-scam-your-1-true-love.html
http://www.callercenter.com/blg/articles/love-calculator-scam-breaks-hearts/

These scams did not provide promised services, made it hard or impossible to unsubscribe, were deliberately deceptive about costs and made unauthorized charges.

Wednesday 12 March 2014

Mariner starts new revaluation fraud with Yellow Brick Road associates

Mariner (MCX.AX) is a failed investment company that has destroyed hundreds of millions of dollars in investor wealth, while enriching the scheme operators. After years of catastrophic losses and with $1.3m negative net assets in its latest half yearly report, Mariner finally seemed unable to cause more shareholder value destruction. But the decaying corpse of Mariner refuses to stay down, as the listed shell still retains value as a vehicle for securities fraud. Mariner has attempted to launch various revaluation and related party frauds, while propping up the company through related parties including Lemarne Corporation (LMC.AX). Scheduled to buy (and immediately revalue) retirement village assets, the project vendors subsequently pulled out, possibly after realizing the fraudulence of their counterparty and reputational risk involved.

http://www.asx.com.au/asxpdf/20140207/pdf/42mlb7lcxy2rwc.pdf

But many others have less compunction about morality or reputational risk. On 28 February, Mariner announced it was "buying" a rental book of plant and equipment assets for $13m, with the vendors financing the acquisition. This allows the vendors to move the assets off the balance sheet, and allows Mariner directors to attach their snouts to the trough of a new rort.

http://www.asx.com.au/asxpdf/20140228/pdf/42n37fbwv9p0d0.pdf

The transaction involved a $11m loan and a $1.85m convertible note. It was also announced on 28 February that a "sophisticated investor", presumably entirely unrelated from the vendor "syndicate of investors", was to be issued 1.5m MCX shares for a $0.15m consideration. Today Mariner announced that Global Clean Energy Finance Pty Ltd had become a substantial shareholder with a 10.9% stake.

http://www.asx.com.au/asxpdf/20140312/pdf/42nb2xpmbnbf7p.pdf

Global Clean Energy Finance Pty Ltd lists the same address as the consistently loss-making Yellow Brick Road (YBR.AX), and its company secretary is a principal at YBR, the directors of which routinely engage in related party transactions to enrich themselves, and laughably hold paid seminars for aspiring entrepreneurs.

Sunday 9 March 2014

The seedy business of SOL Holdings Corp

SOL Holdings Corp (6636.T), formerly Syswave Holdings Corp, is a failing Tokyo-listed semi-conductor business turned fraudulent investment company. With a $30m market cap, SOL Holdings has a legacy of loss-making operations in a potpourri of industries, now deriving "profits" from sham related party transactions. In 2013 Brunei-based private company Greenfields Holdings Limited emerged as new top shareholder and SOL Holdings purportedly focused on agricultural business, acquiring Sorghum Japan from Marvel Seeds for JPY500m.

http://www.reuters.com/finance/stocks/6636.T/key-developments/article/2769978

SOL Holdings props  up its recurring operating losses with fake "profits" from sham transactions with related parties. In September 2012, SOL Holdings announced a "business alliance" with RealVision Inc (6786.T), acquiring a 16.3% stake. In November 2012, SOL Holdings announced an "enhancement" of the alliance, upping its stake in RealVision to 32.2%. As part of this "enhancement", SOL Holdings sold Soar System to RealVision for JPY251m, having previously bought Soar System in 2009.

http://www.reuters.com/finance/stocks/6636.T/key-developments/article/2649112

In November 2012, SOL Holdings announced it was purchasing JOBU Corporation, engaged in database system structuring, dispatching and data deletion, for JPY100m. In December 2013, SOL Holdings announced it was selling JOBU to RealVision for JPY300m. This sham related party transaction created JPY200m in fake "profit", with SOL Holdings tripling its money on paper in little over a year. Without this fraudulent transaction on its books, SOL Holdings would have been forced to report even greater losses.











The share price of SOL Holdings is currently manipulated by the entities controlling the company, leading to the familiar pattern of long-term shareholder value destruction interspersed with sharp sudden ramps to benefit insiders. This includes an unexplained three-fold spike in the share price in 2013. SOL Holdings is now starting up international subsidiaries with which to commit further related party fraud. In March 2014, ASX-listed and perennially value-destroying investment company A1 Investments & Resources (AYI.AX) announced it was acquiring all outstanding shares of Marvel Seeds for $5.5m.

http://www.asx.com.au/asxpdf/20140303/pdf/42n46dybwbjgpw.pdf

This scrip transaction equates to a reverse takeover, given that AYI has a market cap of around $500K and negative net assets of A$1.1m, according to its latest half yearly report. According to AYI, Marvel Seeds retains a "sales agreement" with SOL Holdings, promising $13m of sales in 2014 from this related party. The "profit" created by "transactions" between SOL Holdings and its cartel members can then be used to justify the true purpose of the scheme; issuing shares to hapless investors based on fraudulent accounting.

Saturday 1 March 2014

Blumont Group ramps Merlin Diamonds (MED.AX)

Merlin Diamonds (MED.AX) is a failing diamond miner that was the subject of a proposed takeover by the Singaporean circular investment cartel Blumont Group in early 2013. Now MED is again attempting to join this revaluation fraud. On 17 February 2014, MED announced Blumont Group was being issued 26m shares at $0.075, constituting 11% of shares outstanding. On 20 February, MED announced a further 117,333,333 shares were being issued at $0.075 to "international investors", constituting around a third of the company.


On 28 February, MED announced a scrip take-over offer from Blumont Group, offering 5.7 Blumont shares for every 2 MED shares. This implies a "market" value of $0.15 for MED, and its share price was immediately moved 41% to $0.12 by the cartel. Those "international investors" sure had excellent timing, achieving unrealized profits of $5.3 million, a 60% gain in a week. They can then claim these fake "profits" in annual reports, and attract new sucker investors based on the fraudulent performance figures.

It goes without saying that the "international investors" are associates of the Blumont cartel, and that these are all sham transactions between related parties, designed to create fake "profits" and "assets". Merlin Diamonds now functions as a vehicle for international securities fraud.

ASIC refuses to take any action as the number of openly fraudulent ASX-listed companies rises by the day. No reasonable person could honestly claim to believe that these revaluation frauds are legit, the result of non-collusive market behavior. But sanity testing its results is not part of ASIC's procedure. As long as ASIC has followed its procedures, it regards itself as having done a fine job, even if the results are abhorrent.