An investigation by the South China Morning Post into a US$670 million Cayman Islands investment firm has revealed large losses for some of its Hong Kong and overseas clients. The probe into Porton Capital, a venture capital investment advisory firm run by Dubai-based businessman Harvey Boulter, focused on an apparent mismatch between prices investors paid for shares in fledgling technology companies promoted by Boulter, and the actual issue prices recorded in the companies' annual accounts. One client, who requested anonymity, told the Post he had lost up to 90 per cent of his investment to hidden upfront charges. Porton acts as an intermediary between start-up technology firms and wealth management firms. Investors take a high-risk bet that the technology firm strikes gold and goes public, or is bought for a hefty premium. When asked, Boulter explained that Porton created a spread - a difference in price between what Porton paid for the shares and what investors then paid Porton - of between 15 and 20 per cent to reward the financial advisory firms that sold Porton products. The commissions were "material" but "normal in any market", he said. Any suggestion that clients paid more than 20 per cent was "completely wrong". Investors said they were unaware the upfront charges were so steep. More than a dozen transactions in four Porton portfolio companies were compared using data from broker emails and client records against information in corporate filings held by Britain's Companies House. One example that typifies the price investors paid was disease detection kit maker Engima Diagnostics. In early 2010, a Tokyo-based adviser emailed clients recommending shares at 40 pence (HK$4.85) each in the Porton portfolio company. A search of related Enigma accounts for that period showed 287 million new shares worth £46 million were issued in five tranches priced between 13 and 24 pence. The difference suggests investors lost at least 40 per cent upfront. Expatriate investor David Lewnes said he bought Enigma shares from the same adviser at 50 pence each later the same year, suggesting an upfront loss of more than half his capital. Last January Lewnes was accused by Boulter of authoring a blog critical of Porton, a charge Lewnes denied. After receiving multiple emails of complaint from both Boulter and Porton's lawyers, Lewnes filed a charge of harassment against Boulter with the Singapore Police Force. Boulter last week threatened to sue his client for "breach" of a non-disclosure agreement after learning that Lewnes had spoken to the Post. In 2006, an earlier Enigma investor paid 26 pence each for the shares. Company accounts show 365.3 million shares were issued at that time, raising £10.6 million (HK$124 million). The issue prices ranged from 2.1 to 4.3 pence. It is not clear where the remaining 90 per cent of the client's money went. "I wasn't aware of the level of commissions being paid to brokers, and it's fair to say that if I had known it was as high as 20 per cent, I would have thought twice about investing," said one Porton investor who spoke on condition of anonymity. Venture capital veterans said the commission rates were well above average. "A 20 per cent brokerage commission is very high. Normally, commissions do not exceed 5 per cent," said Basil Hwang, an expert on venture capital transactions, and a partner at Zhong Lun, one of the largest law firms on the mainland. Others pointed out, however, that so-called "early stage companies" such as those in the Porton portfolio, were typically illiquid and subject to high transaction costs given the relatively small amounts of capital raised from retail investors at each fundraising. That volatility, which gives the prospect for substantial returns for relatively small initial sums paid, is what attracts many investors who gamble on being able to sell for a much higher price. A list of client transactions including Lewnes' was sent by the Post to Porton for analysis. Boulter declined to comment on specific transactions or confirm the original share issue prices. Shares issued at different prices throughout the year, anti-dilution shares, or investor confusion, might explain any misunderstanding, he said, when asked about the disparities. Financial product sales accounted for a small part of Porton's wider defence and security business, he said. Several Porton-funded companies folded in recent years and although Boulter said there had been some successes, he declined to identify them. However, he did say commission rates had recently fallen to between 7 and 10 per cent. Investors earlier filed complaints with the Cayman authorities alleging possible fraud and accounting irregularities. The Cayman Islands Monetary Authority declined to comment. A spokesman for Ploughshare Innovations, the British government body responsible for commercialising taxpayer-funded research in co-operation with private sector firms, including Porton, declined to answer questions from the Post .