This week the U.S. Attorney's Office for the Southern District of New York [1]unsealed charges over a "scheme to commit fraud" in carbon markets, which they say fraudulently netted one company "tens of millions of dollars" worth of credits — which led to "securing an investment of over $100 million."

[2]MarketWatch reports :

> Ken Newcombe had spent years building a program to distribute more environmentally friendly cookstoves for free to rural communities in Africa and Southeast Asia. The benefit for his company, C-Quest Capital, would be the carbon credits it would receive in exchange for reducing the amount of fuel people burned in order to cook food — credits the company could then sell for a profit to big oil companies like BP.

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> But when Newcombe tried to ramp up the program, federal prosecutors said in an indictment made public Wednesday, he quickly realized that the stoves wouldn't deliver the emissions savings he had promised investors. Rather than admit his mistake, he and his partners cooked the books instead, prosecutors said... That allowed them to obtain carbon credits worth tens of millions of dollars that they didn't deserve, prosecutors said. On the basis of the fraudulently gained credits, prosecutors said, C-Quest was able to secure $250 million in funding from an outside investor.

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> "The alleged actions of the defendants and their co-conspirators risked undermining the integrity of [the global market for carbon credits], which is an important part of the fight against climate change," said Damian Williams, the U.S. attorney for the Southern District of New York.

From [3]announced by the U.S. Attorney's Office :

> U.S. Attorney Damian Williams said... "The alleged actions of the defendants and their co-conspirators risked undermining the integrity of that market, which is an important part of the fight against climate change. Protecting the sanctity and integrity of the financial markets continues to be a cornerstone initiative for this Office, and we will continue to be vigilant in rooting out fraud in the market for carbon credits...."

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> While most carbon credits are created through, and trade in compliance markets, there is also a voluntary carbon market. Voluntary markets revolve around companies and entities that voluntarily set goals to reduce or offset their carbon emissions, often to align with goals from employees or shareholders. In voluntary markets, the credits are issued by non-governmental organizations, using standards for measuring emission reductions that they develop based on input from market participants, rather than on mandates from governments. The non-governmental organizations issue voluntary carbon credits to project developers that run projects that reduce emissions or remove greenhouse gases from the atmosphere.

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> CQC was a for-profit company that ran projects to generate carbon credits — including a type of credit known as a voluntary carbon unit ("VCU") — by reducing emissions of greenhouse gases. CQC profited by selling VCUs it obtained, often to companies seeking to offset the impact of greenhouse gases they emit in the course of operating their businesses.

The company itself was not charged due to "voluntary and timely self-disclosure of misconduct," according to the announcement, along with "full and proactive cooperation, timely and appropriate remediation, and agreement to cancel or void certain voluntary carbon units.



[1] https://www.justice.gov/usao-sdny/pr/us-attorney-announces-criminal-charges-multi-year-fraud-scheme-market-carbon-credits

[2] https://www.marketwatch.com/story/a-disaster-for-us-how-a-carbon-credit-pioneer-allegedly-stole-millions-of-dollars-by-cooking-the-books-1f4cc01d

[3] https://www.justice.gov/usao-sdny/pr/us-attorney-announces-criminal-charges-multi-year-fraud-scheme-market-carbon-credits