Controversial rare earth metals company looks to cut and run

The company involved in selling baskets of rare earth metals to South African investors has sent messages to its clients informing them that it is ending its relationship with them. It has issued “cessation notices” telling clients that it is “unable to undertake any further dealings”.

What this means is that the company is no longer taking any responsibility for the baskets of rare earth metals that it had sold and was supposedly storing for clients in Dubai. If clients hope to ever realise any value by selling their ‘investments’, Electio is also no longer going to help them to do so.

Moneyweb highlighted last week how Electio clients had complained that they were unable to get any money back after buying baskets of technology metals through the company. Electio had originally told them that they would facilitate the buying and selling of their baskets, but when clients tried to sell their holdings they were repeatedly told that there was no liquidity. Some clients have been trying to liquidate their investments without success since at least October last year.

The lack of liquidity also raised serious questions about the valuations on the baskets that Electio was giving to clients. On the company’s ‘trading platform’, clients are shown a ‘market price’ for the different baskets, but if there is no market, then one has to question where this price comes from.

As Moneyweb’s investigation found, the prices of the baskets only ever went up, even when rare earth metal prices were depressed. There was also no correlation between Electio’s basket prices and the performance of the VanEck Vectors Rare Earth/Strategic Metals ETF, which is listed on the New York Stock Exchange and provides a good insight on market prices for these metals.

Storage

According to Electio’s website and communication sent to clients, the baskets are currently stored in a bonded warehouse at Weiss Röhlig’s facilities in Dubai. Electio has also told clients that the baskets are under the custodianship of Bermuda Commercial Bank.

In its cessation notice, the company does not however give clients any indication of what it would cost to keep their baskets there, nor does it suggest what costs would be involved in moving them. It only made it clear that the clients would be responsible for any further expenses.

The full cessation notice reads:

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A number of clients have told Moneyweb that they now doubt whether there was any truth in what they were originally told by Electio. Attempts by Moneyweb to independently verify the existence of the rare earth metals sold by Electio are ongoing, but have so far been unsuccessful.

No response from Electio

Moneyweb sent a number of questions to the email address given by Electio to its clients, but received no response by the time of publishing. Moneyweb wanted to know:

• Why is Electio unable to ‘undertake any further dealings’?
• If clients are now responsible for trading their own baskets, where can they hope to trade them, and with whom?
• Has the value of these baskets been independently confirmed?
• Is Electio offering clients any compensation?

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