BVI Offshore Business: Grey Area

Wealthy Australian-Romanian businessman Frank Timis said he would initiate free share issue to some investors of Firepower Operations, an Australian branch of the BVI-based Firepower Holdings Group Ltd. The businessman said that investors who had bought shares in a Cayman-based Firepower company would receive compensation by Christmas or after it. However, no compensations will be paid to the majority of investors, who had purchased shares in a separate Firepower firm listed in the British Virgin Islands.

In September, Mr Timis told that he would give Firepower investors free shares in a British company launched by him and named Greenpower – the company which was probably set up for transferring money from Firepower, and which was intended to build a new business with some of Firepower’s products. Now, his representative said that giving such promises Mr Timis did not realise the extent of the fraud within the Firepower group, major part of which was centred exactly in BVI.

The liquidator of the failed company Bryan Hughes does not believe that investors of either Cayman- or BVI-based Firepower would receive any sum of money from Mr Timis, provided that both the businessman and his new firm Greenpower had no financial or executive links with Firepower group, so they have no obligations to compensate its investors. Mr Hughes also estimated that there are just about 40 people who held shares in the Cayman firm and which would be compensated, while the BVI company had more than 1000 investors, which are now excluded by Mr Timis from the promised share issue.

Greenpower executives say that there are more than 100 people who held shares in the Cayman Islands firm, and that those investors who receive shares in Greenpower would be able to keep them or recoup the money they invested in Firepower by selling the shares to institutional investors who had been lined up by Greenpower.

Bryan Hughes, the liquidator of the failed fuel technology company Firepower Operations Pty Ltd, an Australian branch of the BVI-registered Firepower Holdings Group Ltd., has called an informal meeting of shareholders to look into suggestions that company’s previous directors are spending BVI group’s money, setting up a new company called Greenpower. He said he had seen documents showing  that money was transferred to a new business as late as July. The liquidator is not sure about the jurisdiction they have registered in, but he has information that they have been operating out of London, making efforts to acquire  the stock of Firepower.

At meetings across Australia, Mr. Hughes told that Firepower shareholders would get no return on the millions of dollars they invested into the fuel technology company without taking legal action. By his words, Firepower’s secret accounts showed losses of over $40 million in the past three years. Also, Mr. Hughes had information that there were offshore bank accounts containing significant amounts, and the BVI group itself had no assets and no patents; he said at the meeting that about $80 million to $100 million had been invested in Firepower, but much of the money “had gone straight to other companies through a complex offshore web.”

The company Firepower Operations is to be liquidated with debts of almost $10 million, and corporate regulators from the Australian Securities and Investments Commission are taking new steps against the BVI company and its associated companies.

Firepower has about 1,200 shareholders who have invested up to $100 million. The company owes millions of dollars to creditors, including the Western Force rugby team and Sydney Kings basketball team. Mr Hughes is the official liquidator of the Firepower Group’s British Virgin Islands-based parent company, and he is seeking to have Firepower BVI wound up. Tim Johnston, the sole director of the Australian-based Firepower Operations, who was also the director and executive chairman of the parent company Firepower BVI, could not be reached for comments.

Mr Hughes revealed at the meeting that he would consider actions against Mr Johnston for insolvent trading, and that, by his expectations, there would be petitions for his bankruptcy.

The U.S. oil and gas company JMG Exploration, Inc. announced that Newco Group Ltd., incorporated under the laws of the British Virgin Islands, has failed to repay a US$3mln loan and accrued interest and fees that was due in July 2008. As a consequence of this, JMG issued a formal notice of default on July 22.

The BVI company is given 15 days to transfer the shares of Iris Computers Ltd, which collaterized this loan into the name of JMG, unless an alternative settlement arrangement is consummated by August 1, 2008, or a default is cured prior to that date.

The Nevada-registered JMG Exploration, Inc. reported the termination of the share exchange with BVI-registered Newco Group Ltd. already in February this year. Later on, JMG Exploration updated status of defaulted loan to the BVI company.