Appleguild: scammers that came back from the dead

This coloured diamonds investment scam firm has been shut down TWICE by the authorities.

Can you tell the difference between a coloured diamond and a fake – especially if they are in a not to be opened sealed packet? I can't. And even if I could, I would not have the faintest idea of the gem's real value.

I have warned many times that coloured diamonds are an investment no-no. It's “diamonds are for never” - unless as jewellery or used industrially.

How the scammers tempt you

The coloured diamond scam has been around for a decade. And while company names change, the script does not. It is always something about how prized these gems are, how they are not mined any more, and how the Chinese/Russians/Indians/Brazilians so value these jewels that they will pay anything. They are bound to soar in price!

It's the old con trick. A cold caller posing as an expert convinces someone with money to hand over a substantial slice with the promise of high returns.

Once hooked, what do victims get? If they are lucky, a diamond of sorts, though no one will really know what it's worth as there is no clear market in diamonds, coloured or not. If they are unlucky, it will be a fake. You probably won't get to see. Scam merchants keep stones offshore to avoid VAT, claiming opening the sealed packets renders the contents less valuable. Experts can't check on your behalf.

Appleguild: scammers that came back from the dead

London-based coloured diamond merchant Appleguild did not even bother with “paste” - the trade name for phoney jewels - figuring the nicety of offering even a piece of glass was an unnecessary cost.

And now Appleguild, an off-the-shelf company which traded as Gold Standard Commodities, has been ordered into liquidation on public interest grounds following an investigation by the Insolvency Service.

It falsely claimed to be an independent commodities broker based in the City of London since 2007 although it operated from a short term serviced office block in south west London and was only set up in August 2011.

Its website was grandiose. It said its mission was "advising clients on mainstream commodities which we believe can hedge our clients against the difficulties that face us in today’s economy. We pride ourselves on the returns we show our clients. As you may already be aware commodities are in a bull market and continue to outperform in the current economic climate.”

Every statement in that paragraph was a lie. There was no advice – only a boiler room sales pitch. It did not sell mainstream commodities – only coloured diamonds. There were no returns to clients. And commodities peaked in late 2011.

Appleguild lasted just six months before it was first shut down in January 2012 by investigators following public complaints. But no one knows exactly how much they took because lack of co-operation from the company’s officers and financial records that were sketchy at best. The company’s de facto director, Christopher James Newhouse told the court which issued the final compulsory liquidation order that 15 customers had placed orders for over £100,000, but only one order was “fulfilled”.

Whether that was with a real gem or paste is unknown.

A questionable history

Newhouse and his sidekick salesman Michael Bohdjalian were previously involved with a land banking/carbon credits scheme shut down in 2012 following an earlier Insolvency Service action – yet another instance of transferring from one scam to another. All they had to do was to substitute diamonds for land or carbon credits in their script. Their land/carbon racket netted £3.2 million.

Ordering the company into liquidation on grounds of public interest (on 29 January 2014) Ms Registrar Derrett said: “At least one disappointed customer was unable to contact the company in December 2011 and it appears that the management of the company was rendered deliberately opaque so that customers were unable to identify those responsible for the management of the company.

She continued: “It is admitted that the purpose was to avoid Mr Newhouse being named on the public file. It may be and the suggested reason for this is that of a previous investigation and winding-up orders made in the public interest against two companies, Berkeley Warbeck Limited and Dentam Frost Ltd which operated a land banking scheme and Mr Newhouse was involved as was another individual called Mr Michael Bohdjalian.

"The company’s website claimed that the company had been advising clients since 2007 dealing in precious metals and gemstones and took pride in the returns to investors. The truth is the website gave a misleading impression to investors of the company’s experience in the market and its successes in providing returns to investors. The reality was that the company only traded since August 2011 and not, as claimed, from the City of London. It dealt only in diamonds.”

Will this stop the coloured diamonds scam? No. There are many other companies out there with some respectable news media repeating the story. Will Appleguild's victims get their money back? Almost certainly not.

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