A cryptocurrency investment firm with links to two all-party parliamentary groups (APPGs) appears to have disappeared, leaving some investors fearing they have lost tens of thousands of pounds and raising the prospect of further questions being asked about the role of APPGs in parliament.
Phoenix Community Capital established itself last year as a cryptocurrency project and investment scheme, which it said at one point was valued at $800m (£665m). It was a sponsor of one APPG, and its co-founder, Luke Sullivan, spoke at an event for a second APPG , as well as appearing as a panellist for events hosted by peers in parliament.
However, the company appears to have vanished in September last year, with its website going offline and the investment portfolios, known as “nests”, becoming inaccessible to an estimated 8,000 investors after that date.
Some investors, including a former Premier League footballer, claim to have lost tens of thousands of pounds each.
Some of the firm’s assets and its name appear to have been sold to a new company run by an individual called “Dan”, who has told investors it has no obligation towards them, but that it would still try to make them some returns.
Asked what had happened to the company and its investments, Sullivan said he would respond if the Guardian flew to the Philippines to discuss it further. He criticised the Guardian for making “a number of factual errors” and said he was not being allowed an opportunity to “clarify the real facts”, and then said he could not respond to a further request for comment.
The company had promoted itself online by referring to its links to the House of Lords, APPGs and parliamentarians.
The situation is likely to fuel concerns about the use of parliament and the APPG system by companies to lend themselves prestige and access to politicians without much scrutiny.
APPGs are informal groups in parliament formed of MPs and peers to discuss topics of special interest, from countries to economic sectors. They must be chaired by MPs, but are often run or funded by lobbyists and corporate donors seeking to influence government policy or gain credibility.
It also shines a light on the rise of lobbying of MPs and peers by the crypto sector as the government considers the case to bring it under regulation. The sector is largely unregulated, and the Financial Conduct Authority has repeatedly warned investors that they risk losing all of their money.
Phoenix Community Capital, which was US-based, gave £5,000 last year to the APPG on blockchain – the technology behind cryptocurrencies but which also has other uses.
The company appeared on the APPG’s website as one of its corporate “partners”. The group is co-chaired by Martin Docherty-Hughes, a Scottish National party MP who said he had no contact with, or knowledge of, Phoenix.
Separately, Phoenix Community Capital had links to the APPG on the metaverse and web 3.0, chaired by Manzila Pola Uddin, a non-affiliated peer who was formerly a Labour councillor.
Sullivan was a guest speaker at an event hosted by the APPG at a place called “Magna Carta Island” in Surrey in summer 2022.
Earlier in the year Lady Uddin was the parliamentary sponsor of a breakfast event hosted by the company on the House of Lords terrace, where people from the industry were presented with awards.
In one video shot on the terrace, Sullivan was praised in introductory remarks by Uddin, who said he was “an expert and I know he is very deeply committed to empowerment of the community”.
He also made appearances at two non-APPG panel events in the Palace of Westminster alongside people linked to the APPGs for an event called “metaverse week”, one of which was hosted by Tim Clement-Jones, a Liberal Democrat peer.
The founders of Phoenix Community Capital, including Sullivan, who was based in the UK, appear to have left the company in September and a now-deleted message on its Twitter feed said it was under new management. Some investors claim to have lost more than $100,000 each.
The new incarnation of the company, controlled by “Dan”, released a message on an internet forum in October last year saying that around 1,000 investors had made positive returns totalling around $57m, while around 7,400 were in the red to the tune of $87m.
The new company has not responded to requests for comment but “Dan” has told investors he will try to make them some returns even though he has no obligation to do so, and has dropped small amounts worth $100 to $1,000 to some of the worst-affected investors.
In the case of Phoenix Community Capital, investors bought tokens of a cryptocurrency called fire and 10 tokens earned investors a “nest”.
Each nest offered a return of 0.225 fire tokens a day – meaning they would get their original investment back in 45 days and keep accumulating more. Fire tokens were highly valued earlier in 2022 but by the summer had become almost worthless – and in any case, investors can no longer access their accounts to sell off the tokens.
Under the structure of the project, the company used seven out of every 10 fire tokens from each nest to pay rewards to other investors and two in 10 to invest in new crypto projects, while one in 10 went into a “liquidity pool”. It insisted this approach was sustainable but the investment projects did not appear to have produced returns when the company’s website went offline.
One investor, Alan Rogers, a former Premier League footballer, said he had lost an investment of around $50,000 and he believed the founders were no longer involved.
Another investor told the Guardian: “I lost about £5,000 – I got greedy buying the nests. The returns were ridiculous to be honest… Obviously people just kept on buying more nests with the returns rather than cashing out.”
A third investor, Jonathan, who did not want his surname published, said he was an early investor and had got out early without losing money, but some of his friends and relatives had invested and lost tens of thousands of pounds.
“Luke always used to say he had been homeless and now he just wanted to get as many people to eat at the big table as possible…. I know some people lost over $100k each. People got really badly burned.”
The APPG on blockchain, whose secretariat is a thinktank called the Big Innovation Centre, distanced itself from Phoenix Community Capital, although it acknowledged the sponsorship of £5,000.
Prof Birgitte Andersen, of the Big Innovation Centre, said it was “wrong to bring APPGs into the controversy of Phoenix Community Capital”, adding: “There is no relationship.” She said the company “didn’t participate in the APPG blockchain evidence sessions to my knowledge” and that the APPG and its secretariat “behave transparently, ethically, and our evidence and expert speakers add to evidence-based decision-making for policymakers”.
Docherty-Hughes said: “I have spoken on several occasions in the house and elsewhere about the pernicious use of opaque funding in our politics, and the loopholes that still exist which allow individuals and companies to influence the political process without requisite scrutiny. It has been clear to me for some time that APPGs are one such back door that has been left wide open, giving access and privileges around parliament to people who really don’t deserve it.
“[…] The vast majority of APPGs, including those I am a member of, would have nothing to fear from tighter regulation that ensured transparency and accountability in the process of funding this vital work.”
Clement-Jones said he had been asked to chair the meeting in parliament because of his interest in the metaverse, that it was not an APPG meeting and that Sullivan was one of nine speakers.
“With hindsight it is regrettable he was on the panel but I am not sure what due diligence you are implying is necessary or feasible in these circumstances,” he said.
On behalf of the APPG on the metaverse, Uddin said: “Mr Sullivan has not been involved in our APPG at any time or capacity and certainly did not seek permission or inform us prior to making any reference to the APPG on metaverse and web 3.0.” Asked for a further comment on Sullivan’s appearance as a speaker at an APPG event, she said she had made introductory remarks at the start and was not part of any panel discussion with any other speakers.
On her hosting of a breakfast sponsored by the company, she said: “I was informed by the organiser that Mr Sullivan was an expert in his field of work and involved with schools and committed to improving technology education in the community. I merely reiterated that information which I was given in the meeting.”