Because the bells have been ringing within the 2019 New Yr, Praesidium International fired off a self-congratulatory e-newsletter to buyers saying that its Managed FX Fund had clocked up an astonishing return of 43.5% for the earlier 12 months.
Returns like this have been apparently par for the course, ranging between 43.5% and 74.3% for every of the earlier 4 years.
The e-newsletter goes on: “’Too good to be true’ is a press release we hear daily when new purchasers first be taught in regards to the sort of returns the Fund has been delivering 12 months after 12 months. And when evaluating five-year complete returns of Praesidium, to the efficiency of extra acquainted funding merchandise, who may blame them!”
Praesidium apparently did this by investing in foreign exchange markets, managed by “an skilled workforce of merchants”.
The writer of the e-newsletter was Gary Wilde, Praesidium International’s Indian Ocean Islands director, based mostly in Mauritius.
Because it seems, it was too good to be true.
In June 2020, Praesidium Wealth buyers acquired a e-newsletter with some alarming information. Covid was a “black swan” occasion that had created unprecedented volatility in world markets, leading to a 40% drawdown in funds beneath funding. Praesidium, like many different funding firms, was not resistant to this volatility.
However there was no want to fret, purchasers have been informed, as plans have been being put in place to recuperate from these losses.
Some purchasers have been lower than happy at this sudden flip of occasions. They inform Moneyweb this was the primary time in 5 years the corporate had reported losses. Some feared their complete funding was in peril of disappearing altogether.
Praesidium reassured buyers that enterprise continuity plans had been put in place. It additionally promised higher and sooner communications with purchasers, who have been understandably involved in regards to the deteriorating buying and selling outcomes. The corporate determined to waive its regular efficiency charges on buying and selling accounts till the drawdown losses have been recovered.
The buying and selling workforce additionally volunteered to place in further hours of buying and selling – which veteran merchants would recognise as an indication of desperation, since extra buying and selling doesn’t essentially imply extra earnings (usually, the reverse).
Large funds in danger
One investor contacted by Moneyweb has $1.9 million (R28.9 million) in danger within the firm. One other overseas-based investor sunk $900 000 (R13.7 million) into the fund.
“We have been launched to the Praesidium by a buddy after we have been on a visit to Mauritius, with guarantees of returns of about 3% a month,” says the investor, who requested to not be named. “We initially put in $400 000, which went right into a financial institution in Mauritius, after which later put in one other $500 000, which went to Cyprus.”
All the things appeared to be going swimmingly for the primary 12 months. The investor was in a position to log into the corporate’s funding platform, which mirrored regular progress within the account. It was solely when she acquired the “black swan” letter notifying her of a 40% drawdown within the buying and selling account that she began to ask questions. She was informed that her funds have been being traded via a platform referred to as FXPrimus in Cyprus. She reached out to FXPrimus in Cyprus, which apparently had by no means heard of Praesidium.
It wasn’t trying good. An investigator who regarded into this might discover no occasion on the foreign exchange market that will account for a 40% drawdown.
It was the identical story for Michael Suskin, a Pretoria-based entrepreneur who’s owed about R12 million from an related firm referred to as Imagina FX, beneath the route of Cape City-based Craig Massyn, the lead foreign exchange dealer.
“Craig [Massyn] was an affiliate of mine,” says Suskin, a registered monetary guide who attended a number of programs in foreign exchange, however after listening to of the potential for incomes 2-2.5% a month, determined to take a position with Imagina.
“I began investing in 2015 and I used to be seeing superior returns. I requested Craig Massyn so much questions earlier than I began investing, and as soon as I used to be happy, I positioned my first funding within the first quarter of 2015, and made a number of extra allocations after that. I first received a bit involved in March 2020 once I observed a drop within the returns, which was the primary time there was a drop since I began investing in 2015.”
Learn: A ‘spaculative’ investment at best (Oct 2016)
Buyers like Suskin have been by now in panic mode, making an attempt to withdraw their funds to guard no matter was left. Their requests for withdrawal have been met with a string of messages explaining technical and regulatory hurdles that needed to be crossed earlier than cash may very well be launched. To this point, buyers contacted by Moneyweb have but to obtain a cent. Nor will they, till the liquidation course of is finalised.
Liquidation
Praesidium and its sister firm Imagina FX have been positioned in liquidation in October 2020 after buyers approached the courtroom saying they have been unable to make withdrawals.
The query the liquidators are actually making an attempt to reply is whether or not there’s something left for buyers.
There have been three firms bearing the title Imagina: Imagina FX, Imagina Asset Administration, and Imagina Worldwide Buying and selling, based mostly in Mauritius.
Stunning discovery
Not lengthy after the “black swan” letter was despatched out to buyers, Chad Thomas of IRS Forensic Investigators was requested by an abroad shopper to see what he may sniff out. What he discovered was stunning.
“Buyers have been asking for refunds they usually have been getting the same old runaround with these kind of schemes. My recommendation was to cease ready and to proceed in opposition to the corporate for liquidation.”
Fb and social media have been now aflame with accusations of fraud by the administrators of the corporate, which accusations have been denied.
Theo van den Heever of D&T Belief was appointed provisional liquidator of Praesidium, and Christian Bester of Mazars was handed the duty of lead provisional liquidator for Imagina FX.
Van den Heever says a verify into the Praesidium checking account confirmed solely R100 000 accessible as at October 2020.
The Monetary Sector Conduct Authority (FSCA) has opened a forensic investigation to search out out what occurred to the cash beneath Praesidium management, which Van den Heever estimates at north of R1 billion. Others put it nearer to R2 billion.
Legal instances have since been opened in opposition to Praesidium and Imagina.
The Imagina FX provisional liquidators requested the Cape Excessive Court docket for prolonged powers to trace down firm belongings, and on October 27 final 12 months was granted an Anton Piller order to go looking (with out warning) the enterprise and residences of administrators of the corporate for data. The sheriff executed the Anton Piller order the next day and got here away with a trove of paperwork and knowledge.
Ponzi scheme denial
Shaun Pienaar of Enderstein van der Merwe, the legal professional for Massyn, tells Moneyweb the Anton Piller order was unlawfully executed, and denies his shopper was concerned in a Ponzi scheme – which is what a number of buyers allege.
“The sheriff took every little thing, didn’t determine proof, after which handed that proof over to the attorneys for the liquidators – which they aren’t allowed to do,” he says. “The sheriff is meant to carry data (secured by an Anton Piller order) till the courtroom decides what should be performed with it.”
Replies Imagina FX liquidator Christian Bester: “This accusation is vehemently denied by the liquidators and varieties a part of the dispute that shall be determined by the Excessive Court docket on the ninth February 2021.”
Massyn goes to courtroom to problem inquiry
Imagina FX was positioned in last liquidation in November 2020. A Part 417 inquiry (when it comes to the Corporations Act) was convened on November 9 to query officers of the corporate in an try to search out out what occurred to buyers’ funds.
Proof from Carl Japhtes, a former director of Imagina FX, offered some clues as to what occurred to the funds, however the image stays murky.
It appears a considerable portion of funds was channelled into Octox, one of many firms allegedly managed by Massyn.
Massyn, his spouse and sister-in-law have been as a result of give proof to the 417 inquiry in November, however utilized to the Cape Excessive Court docket to put aside their subpoenas. When this was rejected by the excessive courtroom, Massyn informed the inquiry he was within the means of making ready an utility to rescind the order convening the 417 inquiry. He’s additionally difficult the legality of the Anton Piller order which resulted within the seizure of digital information and paperwork from his dwelling and workplace.
Whereas Massyn is taking his battle to the courts, his fellow director Andrew Cunningham-Moorat has offered authorities, together with the police, with a press release.
The primary assembly of collectors was held on December 18, 2020 when claims of R94.6 million have been admitted, however the full quantity of funds invested far exceeds this, in line with these concerned within the case.
One investigator, who requested to not be named, says he’s conscious of no less than three purchasers who invested about R50 million every.
And it appears no less than one investor positioned greater than R100 million into the scheme.
A clearer image of the extent of the injury awaits the second collectors’ assembly, when extra claims will accounted for.
“Mr Massyn has sadly pissed off the method by not aiding us with all of the requested documentation and knowledge with regard to the whereabouts of the funds and it could seem that the majority of the buyers’ funds have been misappropriated,” wrote Bester in a notice to collectors on November 25 final 12 months.
Pierre du Toit, an legal professional at Mostert & Bosman which represents the liquidators of Imagina FX and Praesidium, informed Moneyweb that Massyn had unique management over all the funds entrusted to Imagina FX for funding.
“Massyn blatantly refuses to conform together with his authorized and ethical duties to inform buyers what he had performed with their hard-earned funds. As a substitute, he utilises all accessible avenues of delaying ways to stop being questioned beneath oath,” says Du Toit.
“The query will not be whether or not Massyn should testify, however solely when.”
FSCA weighs in
In Could 2020, the FSCA suspended the licence of Praesidium Advisory Providers “as a result of data acquired indicating the doable misuse of its FSP [Financial Services Provider] licence.”
This was after receiving complaints from buyers alleging that Praesidium Advisory could also be working an unapproved overseas collective funding scheme and soliciting investments from members of the general public.
“The complainants are additionally involved that Praesidium Advisory presents returns as excessive as 40% every year,” reads the FSCA assertion.
“The general public’s consideration is drawn to the truth that the Praesidium International Fund and/or the Praesidium Mauritius Managed Fund, which is being provided by Praesidium Advisory to members of the general public, has not been authorized by the FSCA. Upon concluding its investigation, the FSCA will determine whether or not to withdraw the FSP licence or elevate the suspension.”
The FSCA’s head of enforcement, Gerhard van Deventer, tells Moneyweb {that a} forensic investigation continues to be ongoing to establish how a lot cash was concerned and the place it went.
“From our investigations up to now there doesn’t seem like any proof of considerable buying and selling happening inside Praesidium or Imagina FX,” he says.
“Cash got here in via numerous firms after which seems to have been co-mingled with funds in offshore accounts.”
The FSCA says it’s awaiting data from the Mauritius Monetary Providers Fee and different overseas regulators to see who managed the offshore accounts. Additionally being awaited are statements detailing the transactions executed on the accounts.
The forensic investigators are actually trying to unscramble the Praesidium/Imagina omelette to see if any funds stay to be returned to buyers. That is more likely to be a protracted and doubtlessly disappointing course of for buyers.
Anybody with additional data on the case can contract Captain Laas, working with Johannesburg Business Crimes Unit, at 084 782 2026.
Take heed to Nompu Siziba’s interview with Nancy Bambo, head of market content material at Momentum Securities (or learn the transcript here):
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