Ebullio restructures, leaving trail of enraged investors

In his latest letter to investors, Ebullio’s managing director, Lars Steffensen, sent a clear message: put in more money, or lose everything.

Shareholders of three special purpose vehicles were told that participating in “the offer” would mean stumping up another five percent of their existing holding, and in return they will receive double the share amount in Ebullio Commodities Limited (ECL), which will now operate as a “normal UK Limited company with mining and trading interests”, administered by Ifina.

The new Ebullio Commodities Limited structure. Source confidential.

The expected exit, Steffensen wrote in the shareholder letter, is to IPO on Nasdaq First North in Denmark in the fourth quarter of 2017 and “talks regarding this is already ongoing with the Nasdaq Certified Advisor, Keswick Global”.

Keswick Global declined to verify, as “all our client relationships are covered by non-disclosure agreements”, according to an email from a company representative. The Danish chapter of the Association of Certified Fraud Examiners (ACFE) has been contacted, and its president, Nadia Dosio, said the organization would be interested in hearing more about the case.

Click to read. Shareholder letter dated June 21, 2017. Source confidential.

If investors want to check out ECL, then a good place to start is at Companies House. start with the header “For the year ended April 2015” starting on page 10. And if the name rings a bell in commodities circles, then that might be because there are still lawsuits being settled related to legacy tin trades that caused the .

The latest ruling to went in favour of AC Scout against SG Americas Securities, a branch of Societe Generale. At least one source, who is also an investor in eReturn, one of the three SPVs, has received inquiries from a SocGen legal representative, who is investigating possible collusion between a trader in its firm and Ebullio’s Steffensen.

Investors believed in FCA registration

In 2016, eReturn had a list of over 100 shareholders, which included investment arms of major global banks, various sizes of asset management firms, pension funds, family offices, high net worth individuals, as well as Ebullio employees and partners, according to an .

One source with knowledge of Ebullio’s dealings with investors in the Middle East and London, some who ploughed substantial money into the eReturn vehicle, said they are “livid” over the latest “shenanigans” of the company.

According to the , investors should have received in October 2016 their capital and guaranteed coupon plus the upside performance, if any. But after a couple of payouts, “it’s been a constant stream of lies” to investors, the source said, adding that after payments stopped, Ebullio kept promising to investors they will be paid shortly.


All this should have alerted auditors: if not they are negligent


“Our concern here is that it was an FCA-registered company. The eReturn vehicle was supposed to have been coupon and capital guaranteed as per the letter of guarantee signed by the executive managing partner and the managing partner of Ebullio Capital and the funds were to have been ring-fenced…so how could it be allowed to get away with this outright flagrant violation?”, the source added.

If the FCA does not take punitive measures against Lars Steffensen and Ebullio, then the regulator is sending a message to investors, the source said, “that they cannot take for granted that the undertaking given by the fund managers are genuine and the investors should not believe these fund managers. Indeed a shame.”

The FCA is clearly aware of the case, but whether it is being investigated remains in question. A request for information sent to the FCA last year was replied to with: “Unfortunately, we will not be able to comment on this issue”.

In the regulator’s possession is a pile of evidence that whistleblowers say shows questionable transactions and valuations of assets, misleading statements to investors, among other concerns such as fictitious trades.

A draft audit by Ifina (the current administrator for ECL) for the year ending July 31, 2014, seems to show that there was no trading activity for the audited year: entries for fees and trading commissions with Ebullio’s broker for the activity has only blank spaces. This, at a time when the Ebullio Far East Commodity Fund was winning awards and reporting double-digit returns.

Draft audit for year ended July 31, 2014. Edited to remove company name. Source confidential.
Source: Twitter

Moreover, in a package of bank statements showing transactions between October 2013 and June 2014, deposits with eReturn investor names can be tracked to the account of Ebullio Capital Management, which is not allowed to hold client money, according to the firm’s FCA permissions.

Excerpt from bank statements showing money being paid in to Ebullio Capital Management account. Name of depositor matches that of an eReturn investor. Edited for anonymity.

Paul Barnes, a forensic accountant based in the UK, said that to paint a full picture, more detailed information is required on whether money was then moved where it was supposed to go, as is a longer time span for the bank account records. But one thing is for sure: “All this should have alerted auditors: if not they are negligent,” he said.

It wasn’t until 2016 that Kinetic Partners, the auditors of eReturn, and the FCA told Steffensen that Ebullio would not meet regulatory requirements and he applied to deauthorize the fund, according to a shareholder letter. Kinetic’s services were “disposed of” shortly after.

Excerpt from shareholder letter dated January 21, 2016


Excerpt from shareholder letter February 29, 2016. Despite reporting that there was an agreement to deauthorize the fund, Ebullio Capital Management remains FCA-authorized in liquidation today.


Red flags in Ebullio founder’s history

Whistleblowers, some who have been reporting Ebullio’s activities since 2010, feel that their claims have been ignored, and are extremely frustrated as they become aware of more organizational restructuring and fundraising activities. And looking further back, they are raising questions over how FCA registration was granted in the first place.

Research by another source found that of nine Danish companies in which Steffensen had been active, within 12 months of Steffensen’s retirement, including Copenhagen Ore and Metals As (1995), Berggreen Hi-Fi Import ApS (1996) and Shipbroke.com A/S (2001). In an from around that time, investors in a nightclub scheme associated with Lars Steffensen claimed they were left with broken promises and empty wallets.


“Our concern here is that it was an FCA-registered company…so how could it be allowed to get away with this outright flagrant violation?”


In the US, he was a senior partner in charge of commodity trading at Next Energy, according to media sources, and  with a variety of firms, according to data found in the National Futures Association’s BASIC registry. In 2007, Steffensen opened Ebullio in the UK.

The FCA has an extensive application process, but potentially disqualifying factors, such as those that would affect financial soundness, are firms’ responsibility to “attest” to.

Solo-regulated firms are not required to obtain criminal record checks and regulatory references, but are required to undertake due diligence to satisfy themselves of the individual’s fitness and their responses to the questions in the approved person’s application. If required, however, firms would need to provide their due diligence to assist in the determination of the application.

Photo credit: Peter Barker

Speaking to a group of journalists at the FCA annual public meeting on July 18, Andrew Bailey, the FCA’s chief executive, responded to a question about whether the regulator conducts background checks, for example for criminal records or bankruptcies.

His answer delved into the , as well as the importance of the right balance between protecting people’s rights and demanding transparency and high standards of the individuals who take risks with other people’s money. “It is very much a live issue,” Bailey concluded.

Ebullio whistleblowers’ struggle for accountability 

The FCA said the SM&CR is intended to “reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence”, and came out with a package of measures intended to strengthen, for example, whistleblower protections.

But the first big test for the package of rules is already showing cracks in enforcement over those very protections, as Barclays’ chief executive, James Staley, makes headlines. Staley twice sought to find out who wrote anonymous letters sent to fellow board members.


For a whistleblower going to the FCA now, I don’t think they would notice much difference from a year or two ago


Some two dozen regulators, investors, bankers, lawyers and whistleblowers spoke to the , with many saying that Staley damaged confidence in the principle of whistleblower protection, a crucial element to encourage people to come forward. But whether any regulatory action will be taken remains in question and is the subject of heated debate in the industry.

Brexit, meanwhile, is one of the most complicated issues to be facing the FCA, which finds itself in a position of completing a business deal throughout what is effectively a nasty divorce. Andrew Bailey is only one year into the job, at a period of time when the regulatory authority has been swamped with navigating and implementing sweeping financial reforms, taking action against financial-crisis era fraud including the rigging of interest rate and FX benchmarks, among other major scandals.

During that time the previous regulatory body, the Financial Services Authority, came under the aegis of the Bank of England and rebranded as the Financial Conduct Authority. Now, 10 years on from the financial crisis, has anything meaningful changed in the reality of regulation on the front line?

Cultural change in the FCA, PRA & Bank of England: Practicing what they preach? Authors: André Spicer, Dominic Lindley, Jean-Pascal Gond, Szilvia Mosonyi, Zahira Jaser, Dr. Emilio Marti, Hannah Petersen and Abbie Edwards.

Practicing and preaching

A report published last year by New City Agenda detailing areas for improvement at the FCA described the environment as a “culture of secrecy” that “damages accountability”. In practice, this can manifest as the FCA negotiating secret agreements with firms, and then refusing to disclose them.

Dominic Lindley, co-author of the New City Agenda report and former leader of Which? Financial Services policy team, among other appointments, said that since the report came out, there has been a “different tone from the top” but this has yet to be translated into differences on the front line.

“For a whistleblower going to the FCA now, I don’t think they would notice much difference from a year or two ago…ordinary consumers see something that looks wrong and report it into the FCA, a lot of the time it disappears into a black hole,” he said.

Lindley pointed to two egregious examples in how the FCA treats whistleblowers. , ruled on by the Complaints Commissioner, the FCA had failed to properly investigate a whistleblower’s allegations, had asked the bank involved for its view and then reported that view back verbatim as though it had come from the FCA.

, the FCA was found to be “uncoordinated, fragmented, and focussed upon narrow issues of jurisdiction rather than overall consumer detriment. This was despite much of the evidence (some of it significant and dating back two or three years) about the larger picture being available to the FSA in 2011”.


Some of these people have big, dramatic impacts on their overall financial circumstances because they lose their job, and they lose their ability to get another one within the industry


Lindley also pointed out that although the FCA measures its relationship with firms, the same cannot be found in its dealings with whistleblowers. “If you are not measuring it, you are not going to think it is a priority for improvement,” he said.

At least one of Ebullio’s whistleblowers has filed a complaint about the FCA’s handling of the case.

Too little, too late for Ebullio investors?

Lindley is hesitant to recommend a , but does believe that some remuneration to cover a few years of living is in order.

“Some of these people have big, dramatic impacts on their overall financial circumstances because they lose their job, and they lose their ability to get another one within the industry,” he said.

One Ebullio source is still questioning what happened between the time he claims he was told by an FCA lead investigator that there would be a raid to seize computers and serious actions taken, and then in reality, interviewers showed up, one of which was a “junior”, as one eyewitness described it, who added that they seemed to know little about either physical or paper commodities trading, and accepted all the answers Steffensen gave.

One Ebullio whistleblower said: “If the FCA had taken action, I would have felt vindicated by reporting the firm. Because they did nothing, I have a sense of disappointment in the system and I question if I was right to take the action.”

Having reported, the source resigned, which led to unemployment, the loss of a home and personal assets, and put tremendous strain on the family. “We have not yet recovered financially or emotionally,” said the source.

When asked how it would respond to a whistleblower in such a situation, an FCA spokeswoman sent the following reply: “Cases that result in prosecutions, fines or bans will normally be made public. Where we can publish outcomes of cases, and where your information has helped us, we will normally let you know and thank you for your help.” And a link where the .

A number of people were contacted for comment, including Lars Steffensen, who did not reply to an email and phone call, a representative of Ifina, who did not reply to two emailed requests for comment, and a representative of Kinetic Partners (acquired by MacIntyre Hudson in 2016), who declined to comment. If there are any replies, we will update the article. 

Peter Barker contributed to this report. 

August 3, 2017 update: On August 2, 2017, Lars Steffensen sent replies in two emails from an account linked to , but they did not meet our community standards. In reply to Lars Steffensen’s emails, an interview was requested.

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