Directors Banned After £4 Million Investor Loss in Derby Student Accommodation Development
Three directors involved in a troubled student accommodation project in Derby have been banned from the corporate arena for seven years after their misleading investment practices resulted in over £4 million lost by investors. The individuals, Fraser MacDonald, Gavin Barry, and Edward Fowkes, promoted an investment offer that misrepresented the security and use of investor funds.
Investors, comprised mainly of high-net-worth individuals, were assured that their contributions would exclusively finance The Croft development and that they would rank second in line for repayment. Unfortunately, this was not the case. The company had entered into substantial loan agreements with commercial lenders that prioritized repayment above the investors, placing them third in line, contrary to earlier claims.
Between January and July 2019, 44 investments were made by 42 investors, with the largest individual investment reaching £504,000. However, it was uncovered that more money was raised for The Croft than needed, and over £2 million of investor funds were transferred to a connected company. By the time Prosperity Cathedral View Development entered administration in May 2020, it was saddled with liabilities exceeding £29 million, while Prosperity Cathedral View NMPI followed suit in August with liabilities over £11 million and no assets.
In March 2021, The Croft was sold for more than £18 million, leading to full repayment to one lender and a partial recovery for another. However, none of the 42 investors saw a return on their investments.
Commentary
While it can be argued that the COVID-19 pandemic significantly impacted this venture, it does not absolve the directors of their responsibility. Creditors have already invested substantial sums into the insolvency process to seek legal opinions. It is hoped that these creditors will also pursue legal actions against the directors for their misleading practices.
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