Carbon credit fraud

What it is

Carbon credits and offsets are bought by companies and individuals to offset emissions. Carbon credit fraud exploits that. In the form that has produced most of the sentences, boiler rooms cold-called mostly older people and sold voluntary carbon credits as safe, high-return investments. In a second form, charged in 2024, a developer is accused of manipulating project data so that a registry issued it more credits than it had earned.

How it actually works

1. The call

   A call center cold-calls people. In the UK cases the targets were older: brokers sought homeowners aged 50 and over in affluent postcodes, and the U.S. case describes victims who were primarily elderly or retired. Brokers, according to Financial Planning Today, often used fake names.

2. The pitch

   The callers promise a safe, profitable, environmentally friendly investment. In the New York case, callers claimed the investments would help address the climate crisis, and victims were falsely promised that they could be easily sold, carried no risk and would yield a significant short-term return. In the Harman Royce case projected profits of 6% to 100% over four months to 10 years were described.

3. The price

   The credits are sold at prices far above what they trade for. Harman Royce victims paid £5.26 to £6.50 per credit, when an independent consultant’s evidence was that the real trading price was between 25p and 30p. In the Seakens and Ryan case police said mark-ups were over 1000%.

   Where it could have stopped

   In the Harman Royce case, an independent consultant said that voluntary emission reduction credits have no secondary market. A promise of a profit on something that cannot be resold needs someone to explain who buys it. In the Seakens and Ryan case, Financial Planning Today reported that some victims were offered an “exit strategy” only if they bought more credits.

4. The paperwork

   Victims receive documents. Harman Royce sent contract notes and a bogus “carbon market analysis” spreadsheet; the New York defendants emailed purchase contracts and investment certificates. The Seakens and Ryan case used the accounts of a regulated company, which police said gave potential investors reassurance that their money was with a safe third party.

5. The money

   Payments go to accounts in the names of corporate entities. The New York victims wired funds to US accounts in the names of entities controlled by a co-conspirator, and the proceeds were laundered through overseas accounts in Cyprus, Switzerland and the UK in the names of shell companies. Harman Royce’s money bought staff wages, an Aston Martin and a watch.

6. The prosecution

   In the cases here, a British Columbia regulator froze a $1 million wire in 2010, and Essex Police referred the Harman Royce case to the City of London Police. Sentences documented run from two years and three months to eight years. In October 2024 a different kind of case, the alleged manipulation of cookstove data, was charged in New York.

Why it works

It sounds responsible. The New York callers appealed to victims by claiming that the investments were environmentally friendly and would help address the climate crisis.

There was no way to resell. According to evidence in the Harman Royce case, VER credits had no secondary market, so a buyer had no one to sell to.

The pressure to buy more. The New York release describes victims persuaded to make further investments under the false pretense that they could not sell until they bought more, and the Seakens and Ryan case describes “recovery room” sales.

The unregulated label. REDD-Monitor wrote in 2013 that the UK financial regulator played no role in a case because voluntary carbon credits are not regulated. That is the blog’s comment on the UK position at the time and this page has not verified how it stands today.

Where it comes from

The victims in the boiler room cases were in the UK, and the sources do not locate every call center. In the New York case, proceeds were sent through US accounts. The 2024 developer case is in New York and involved projects in sub-Saharan Africa, Asia and Central America, according to Holland & Knight.

The earliest case here. The Macdonald and Downes scam ran from January 2007 to December 2010, and the UK police called their 2013 sentences the first for a carbon credit fraud, as reported by REDD-Monitor.

A new kind. Holland & Knight described the October 2024 federal actions as the first cases arising from fraud in the voluntary carbon market.

Real cases

Red flags

• A cold call selling carbon credits as an investment, especially with a promised return and no risk.
• A price per credit far above the market price, which you cannot easily check.
• “You cannot sell until you buy more.”
• Brokers who use fake names, as the Harman Royce brokers did.
• Documents that look official, such as contract notes, certificates or a price-history spreadsheet, from a company you cannot check.
• An offer to help you exit that requires another purchase.

If it’s happening to you

If you are cold-called about carbon credits, or have bought some and cannot sell:

1. Do not buy from a cold call. The cases here are about unsolicited calls.
2. Do not pay more to be able to sell. In the Seakens and Ryan case this was the recovery-room tactic.
3. Check what the credits are and who buys them, in writing, before you pay.
4. Report it. See where to report.
5. Keep every document, including contract notes and certificates.

Where the money goes

Cross-border in the cases here.

Victims in the UK wired money to accounts in the US in the names of corporate entities; the Macdonald and Downes money went to Canadian and US accounts, and a $1 million wire to a Swiss company was blocked. The New York release says the proceeds were laundered through overseas accounts in Cyprus, Switzerland and the UK in the names of shell companies. The Seakens and Ryan case used the accounts of a regulated company for what police described as money laundering on a vast scale. Harman Royce’s money went on salaries and luxuries.

By the numbers

No published dataset breaks this scheme out as its own category yet, so there is no chart to show. The data page explains which agency categories exist and why some schemes are invisible in official statistics.