OSINT Analysis: Hudson Financial Group

Published by Investigation team

February 6th, 2017

$10million Funding for ASX Listed Exploration Company

On the 18th October 2016, GBM Resources Limited (GBM) a mining and exploration company listed on the ASX, announced they had secured $10million in debt financing with UK group National Federal Capital Limited.
The terms as announced appeared favourable for GBM, the funding was to be advanced in two tranches to meet the requirements of GBM's work program; and
a month later the parties agreed DD was complete, with an agreed 'tweak' to the timing of the tranches.
In early Dec, GBM announced that $1.5m of Tranche 1 had been received, not quite the $3.5m as promised.
Timetables were reset, some changes made to the expenditure budget to tie in with the new funding.
On 4 Jan 2016 GBM announce that the balance of tranche 1 has not been received and by 16 Jan GBM announce that NFC is in breach of the loan agreement.

OSINT Driven Due Diligence

The purpose of this paper is to walk through a due diligence review of the transaction, NFC and the Company.
This is not a typical DD review, and will primarily rely on OSINT (Open Source Inteligence) driven investigations.
These same techniques can be used by investors looking to make investment decisions and most certainly should be incorporated into the Company's formal due diligence processes.

Background

Background to the announcement

18 Oct 2016 - ASX Announcement "GBM Secures AUD $10m"

About:

National Federal Capital is a UK based independent and privately owned financial services group
principal activities retail unit trusts and management of funds on behalf of financial institutions.

Flag:

Note the use of "UK Based". On review of GBM historic announcement it commonly refers to where Companies have an address - ie Singapore based....when in fact they are offshore companies.

5.1 Key terms of $10m Loan

6057 ounces of gold = $7.4m ($1,230 per ounce)

5.2 21 Nov - conditions satisfied

Note the Condition precedent was one sided.

DD undertaken by NFC on GBM.....

Where is the CP for GBM undertaking due diligence on NFC.

6. National Federation Capital Limited (NFC) - who are they?

GBM's disclosure of NFC is underwhelming, especially considering the 'please explain' by the ASX on the 25th October.

Shareholders and potential investors are left with little option but attempt to do some of their own research.

http://www.asx.com.au/asxpdf/20161027/pdf/43ccv5cbj40b1l.pdf

6.1 Review of www.nationalfed.com website

NFC has a nice dual language website (English and Mandarin) one that recently been updated in late 2016.
Establised in 2002 as a subsidiary of Swedish Group HCB Trust, based in the West Country of England.
While one of the nicer regions of the UK, it appears an unusual location for a financial services group particularly one with a Swedish parent who appears to be targeting the Chinese community.
Perhaps the principal's of NFC are semi-retired, having swapped the hustle and bustle of the City's Square Mile (or the Nortic equivalent) for a life of tweed, landrovers, chasing foxes and shooting a few pheasants here and there.
In their spare time they peddle structured funds through UK's Independant Financial Advisors sector.
With a dozen or more highly performing funds across just about every sector you could imagine, and their own propriatory services such as the National Fed Portolio Architecture Service

Havent even scratched below the surface yet and its already this is on the nose.

6.2 Start with the basics: NFC Company Register - Directors, Shareholders, Capital

Opencorporates - no company in its 100m+ company register.

6.3 UK Companies House

Lets double check this with Companies House.

Again there is NO company named National Federal Capital Limited in the UK.

https://beta.companieshouse.gov.uk/

6.4 Google Search - "National Federal Capital ltd"

The following screenshot is from google search "National Federal Capital Ltd"

5 of the top 7 results are directly relavent to the NFC that appears to have entered into the $10m loan with GBM.

1. nationalfed.com website

2. ICIJ Offshore Leaks Database - node "294075"

3. ICIJ Offshore Leaks Database - node "185159"

5. HCB Financial Group - A new name related to NCF and perhaps related to HCB Trust?

7. National Federal Capital Ltd - British Virgin Islands. Possible confirmation of the true domicile of NFC.

6.5 National Federal Capital Ltd - ICIJ Offshore Leaks (294075)

https://offshoreleaks.icij.org/nodes/294075

6.6 National Federal Capital Ltd - ICIJ Offshore Leaks (185159)

https://offshoreleaks.icij.org/nodes/185159

6.7 National Federal Capital limited is a BVI Company NOT a UK Limited Company

Lets cut to the chase.
National Federal Capital limited was incorporated in the British Virgin Islands on 10 December 2002
However the promoters of NFC represent represents that it operates in the UK.
The following, as set out by Companies House in the UK are some of the requirements for foriegn entities to operate within the UK
Its pretty clear that NFC do not operate in the UK, the story is a pure fabrication
Its not even brass plating - its pure smoke and mirrors.

7. HCB Trust Ek for

7.1 Review of HCB Trust Ek. www.hcbtrust.net

So its clear that the National Federal Capital website (nationalfed.com) is bogus.
Lets look at HCB Trust's website (www.hcbtrust.net)
The website is somewhat reminiscent of NFC's with the home page using a image slider promoting local urban images.
Somewhat perplexing is the statement that HCB Trust is a regionally-based Credit Union. The name HCB Trust doesn't exactly resonate a well branded name for a regional based Credit Union.

Somewhat more concering is that the NFC website proudly states that NFC is a subsidiary of "HCB Trust". Generally speaking, a credit union is a savings and loan co-operative - they take in deposits and make loans to its members. They dont have foriegn subsidiaries that distribute structured products.

7.2 European Business Register

Thanks to www.Kompany.com its a breeze to do a search of Swedish incorporated companies.

Below is a snapshot of the EBR register for HCB Trust Ek. for

Ek. for is short for - "Ekonomisk Forening" under Swedish Law is classed as a 'co-operative'.

Some background research on "Ekonomisk Forening" and "Sparkassa" provide interesting insight and perspective.

7.3 Sparkassa - Ekonomisk Forening

A sparkassa (Swedish credit union) has the legal form of a cooperative (ekonomisk förening). It cannot be incorporated as a Swedish limited liability company or joint-stock company.
Economic Associations to operate as a traditional savings and loan institution with the capitalisation originating through member 'contributions.
As long as there are less than 1,000 members there is no requirement for a banking license and reporting obligations are virtually nonexistent.
Minimum of 3 directors are required with a majority required to reside within the European Union.
Members can be of any nationality, you do not have to report to any government authority when you accept new members (however the Swedish banking authority has the right to request a register of members).

Research Links:

http://aviabiz.com/sweden_credit_unions.html

http://www.slogold.net/sweden.html

https://myip.ms/slogold.net

http://www.etc-lowtax.net/english/swedish_credit_union.htm

http://www.courthousenews.com/2011/10/28/41017.htm

http://www.ptshamrock.com/auto/creditunion.htm

https://myip.ms/ptshamrock.com

7.4 HCB Trust Ekonomisk Forening (EK)

The following link is a copy of the original Company Register Extract of the Bolagsverket, Sweden.

Providing the names of the current board members.

HCB Trust EK. for - Register Report

Flag:

Note that all three board members 'claim' to be residents of Slovenia.

Clearly - Roring, Sen, Wong are not traditional Slovenian surnames and it doesn't take a rocket scientist to work out that its not their real address.

The Slovenian address is provided to meet the criteria EU resident, and in any event the provided address is not even a complete address.