Ponzi scheme ordered to pay back money

By Staff Writer
By Nicolette Dirk and Angelique Ruzicka
 
An inspection report has concluded that the business conducted by DefenceX (also referred to as Net Income Solutions) and Zantech Trading was contravening the Banks Act in that it operated as an illegal deposit-taking scheme.
 
According to reports, DefenceX may be the largest Ponzi scheme seen in South Africa, with approximately 200 000 members. At the time its account was frozen, it held approximately R320 million, but a total of R816 million was found in by investigators.
 
The inspection reports came after The South African Reserve Bank (SARB), conducted inspections into the activities of Zantech Trading and DefenceX to establish whether they were illegal deposit-taking schemes.
 
How did these allegations come about?
 
In May 2013, SARB appointed Ernst & Young Advisory Services (Pty) Limited (EY) as the temporary inspectors to investigate Zantech Trading. The final inspection report concluded that the business conducted by Zantech Trading was contravening the Banks Act in that it operated as an illegal deposit-taking scheme.
 
Last year the Financial Services Board (FSB) warned the public not to conduct financial services business with Zantech Trading. This came after Zantech claimed they had registered with the FSB. The regulator however said that Zantech Trading is not authorised as a Financial Services Provider (FSP) or a representative of an authorised FSP. 
 
“Contrary to Zantech Trading’s claims, the FSB has not granted a temporary licence to this entity.  Zantech has not been audited by the FSB and as an unauthorised FSP, the activities of Zantech Trading are also not authorised,” said the FSB.
 
 
SARB has now directed Zantech to repay the money it had unlawfully obtained and appointed EY as the repayment administrator to facilitate the management and control of the repayment process. The solvency report from EY states that Zantech Trading is insolvent and SARB has initiated the legal process for its liquidation.
 
Regarding DefenceX, SARB appointed PricewaterhouseCoopers (PwC) in February 2013,  to investigate them. Their report concluded that the business conducted by DefenceX was contravening the Banks Act in that it operated as an illegal deposit-taking scheme. 
 
SARB said this finding was confirmed by the Western Cape High Court’s final judgement in June 2013, which also granted the order preventing DefenceX / Net Income Solutions from disposing any of its assets pending the finalisation of the inspection. 
 
“PwC was subsequently appointed as the repayment administrator to facilitate the management and control of the repayment process. As part of this process, further investigations will be conducted to determine the exact amount of money that was unlawfully obtained, where this money and/or assets obtained with it are being kept, the identities of all investors and the verification of investor claims,” said SARB.
 
Investigations don’t end there
 
The SARB is also currently investigating Surapure,  a drinks company which has had its FNB account frozen by FNB. It has since been placed under business rescue. FNB’s  Shaun Chelin, head of legal at FNB said in a statement: “FNB has acted correctly in placing a hold on the account and we are confident that we have acted in the best interests of our customers. 
 
We are assisting the South African Reserve Bank appointed Inspector to urgently address this matter and bring it to finality.”
On SuraPure’s Facebook page, which has 427 likes, it encourages consumers to ‘Start your own soft drinsk and mineral water business without having the actual product but allowing the company to sell it on your behalf’. 
 
On the 28 March Surapure said on its Facebook page that its legal team has sent FNB an urgent communication whereby “they must open the account by 12h00 today or otherwise the Legal Team will urge an urgent Court Application by next week. By 12h00 today there  were no results or communication back from FNB. SuraPure Drinks (PTY) LTD with our Legal Team are now Preparing the Urgent Application for next week against FNB.”
 
It threatened to shut down its own Facebook page but at the time of writing had not done so. Surapure went on to encourage followers to communicate with the company via email: marketing@surapuredrinks.co.za. 
 
Worried about fraud? 
 
The FSB said consumers who wish to conduct financial services with an institution, entity or person should  check beforehand with the FSB on either the toll free number (0800110 443) or on its website www.fsb.co.za  to determine whether or not such an institution, entity or person is authorised to render financial services.

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