Alleged fraud in carbon markets leads to criminal charges | Mintz

The U.S. Attorney’s Office for the Southern District of New York recently opened a prosecution in connection with “a scheme to commit fraud in the carbon markets,” specifically because a company and its executives obtained “fraudulently.”[ed] Tens of millions of dollars worth of carbon credits and fraudulently confiscated[ed] a $100 million investment.” While a comprehensive prosecution of significant fraud by the SDNY is a typical activity of this office, the fact that it involves the carbon markets is significant and noteworthy and suggests that a certain level of regulatory and enforcement attention is paid to that particular market. Although the details of the plan – that the defendants “manipulated data to make it appear as if certain of the [] “Projects have been far more successful in reducing carbon emissions than was actually the case” – describe a variant of variety fraud (e.g. lying about a company’s success to increase revenue and valuation), the topic – CO2 emissions markets – is new and unusual.

The fact that law enforcement has focused on carbon markets also shows the extent to which carbon markets have been relatively unregulated to date. A number of regulators around the world are now trying to impose discipline on a cumbersome and unrestrained market, and this prosecution could be seen as emblematic and part of that effort.

Damian Williams, the United States Attorney for the Southern District of New York, and James E. Dennehy, Assistant Director of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the dismissal of indictments against KENNETH NEWCOMBE and TRIDIP GOSWAMI in connection with a carbon markets fraud scheme that resulted in her company, CQC Impact Investors LLC (“CQC”), fraudulently obtaining tens of millions of dollars in carbon credits and fraudulently securing an investment of over $100 million US dollars.

Today also announced the decision not to bring criminal charges against CQC despite NEWCOMBE and GOSWAMI’s alleged conduct, as CQC self-disclosed the misconduct voluntarily and in a timely manner, co-operated fully and proactively, took timely and appropriate remedial action and agreed to the reversal or invalidate certain VCUs.

www.justice.gov/…

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