Ciaran Ryan
10 minute read
21 Jan 2021
10:41 am

Investors owed over R1bn after two forex trading companies go bankrupt

Ciaran Ryan

The forensic investigators are now attempting to unscramble the Praesidium/Imagina omelette to see if any funds remain to be returned to investors.

As the bells were ringing in the 2019 New Year, Praesidium Global fired off a self-congratulatory newsletter to investors announcing that its Managed FX Fund had clocked up an astonishing return of 43.5% for the previous year.

Returns like this were apparently par for the course, ranging between 43.5% and 74.3% for each of the previous four years.

The newsletter goes on: “’Too good to be true’ is a statement we hear every day when new clients first learn about the kind of returns the Fund has been delivering year after year. And when comparing five-year total returns of Praesidium, to the performance of more familiar investment products, who could blame them!”

Praesidium apparently did this by investing in forex markets, managed by “an experienced team of traders”.

The author of the newsletter was Gary Wilde, Praesidium Global’s Indian Ocean Islands director, based in Mauritius.

As it turns out, it was too good to be true.

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In June 2020, Praesidium Wealth investors received a newsletter with some alarming news. Covid was a “black swan” event that had created unprecedented volatility in world markets, resulting in a 40% drawdown in funds under investment. Praesidium, like many other investment companies, was not immune to this volatility.

But there was no need to worry, clients were told, as plans were being put in place to recover from these losses.

Some clients were less than satisfied at this sudden turn of events. They tell Moneyweb this was the first time in five years the company had reported losses. Some feared their entire investment was in danger of disappearing altogether.

Praesidium reassured investors that business continuity plans had been put in place. It also promised better and faster communications with clients, who were understandably concerned about the deteriorating trading results. The company decided to waive its usual performance fees on trading accounts until the drawdown losses were recovered.

The trading team also volunteered to put in extra hours of trading – which veteran traders would recognise as a sign of desperation, since more trading does not necessarily mean more profits (often, the reverse).

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“We were introduced to the Praesidium by a friend”

One investor contacted by Moneyweb has $1.9 million (R28.9 million) at risk in the company. Another overseas-based investor sunk $900 000 (R13.7 million) into the fund.

“We were introduced to the Praesidium by a friend when we were on a trip to Mauritius, with promises of returns of about 3% a month,” says the investor, who asked not to be named. “We initially put in $400 000, which went into a bank in Mauritius, and then later put in another $500 000, which went to Cyprus.”

Everything seemed to be going swimmingly for the first year. The investor was able to log into the company’s investment platform, which reflected steady growth in the account. It was only when she received the “black swan” letter notifying her of a 40% drawdown in the trading account that she started to ask questions.

She was told that her funds were being traded through a platform called FXPrimus in Cyprus. She reached out to FXPrimus in Cyprus, which apparently had never heard of Praesidium.It wasn’t looking good. An investigator who looked into this could find no event on the forex market that would account for a 40% drawdown.

It was the same story for Michael Suskin, a Pretoria-based entrepreneur who is owed about R12 million from an associated company called Imagina FX, under the direction of Cape Town-based Craig Massyn, the lead forex trader.

“Craig [Massyn] was an associate of mine,” says Suskin, a registered financial consultant who attended several courses in forex, but after hearing of the possibility of earning 2-2.5% a month, decided to invest with Imagina.

“I started investing in 2015 and I was seeing awesome returns. I asked Craig Massyn a lot questions before I started investing, and once I was satisfied, I placed my first investment in the first quarter of 2015, and made a few more allocations after that. I first got a bit concerned in March 2020 when I noticed a drop in the returns, which was the first time there was a drop since I started investing in 2015.”

Investors like Suskin were by now in panic mode, trying to withdraw their funds to protect whatever was left. Their requests for withdrawal were met with a string of messages explaining technical and regulatory hurdles that had to be crossed before money could be released. To date, investors contacted by Moneyweb have yet to receive a cent. Nor will they, until the liquidation process is finalised.

Liquidation

Praesidium and its sister company Imagina FX were placed in liquidation in October 2020 after investors approached the court saying they were unable to make withdrawals.

The question the liquidators are now trying to answer is whether there is anything left for investors.

There were three companies bearing the name Imagina: Imagina FX, Imagina Asset Management, and Imagina International Trading, based in Mauritius.

Shocking discovery

Not long after the “black swan” letter was sent out to investors, Chad Thomas of IRS Forensic Investigators was asked by an overseas client to see what he could sniff out. What he found was shocking.

“Investors were asking for refunds and they were getting the usual runaround with these types of schemes. My advice was to stop waiting and to proceed against the company for liquidation.”

Facebook and social media were now aflame with accusations of fraud by the directors of the company, which accusations were denied.

Theo van den Heever of D&T Trust was appointed provisional liquidator of Praesidium, and Christian Bester of Mazars was handed the task of lead provisional liquidator for Imagina FX.

Van den Heever says a check into the Praesidium bank account showed only R100 000 available as at October 2020.

The Financial Sector Conduct Authority (FSCA) has opened a forensic investigation to find out what happened to the money under Praesidium control, which Van den Heever estimates at north of R1 billion. Others put it closer to R2 billion.

Criminal cases have since been opened against Praesidium and Imagina.

The Imagina FX provisional liquidators asked the Cape High Court for extended powers to track down company assets, and on October 27 last year was granted an Anton Piller order to search (without warning) the business and residences of directors of the company for information. The sheriff executed the Anton Piller order the following day and came away with a trove of documents and information.

Ponzi scheme denial

Shaun Pienaar of Enderstein van der Merwe, the attorney for Massyn, tells Moneyweb the Anton Piller order was unlawfully executed, and denies his client was involved in a Ponzi scheme – which is what several investors allege.

“The sheriff took everything, didn’t identify evidence, and then handed that evidence over to the attorneys for the liquidators – which they are not allowed to do,” he says. “The sheriff is supposed to hold information (secured by an Anton Piller order) until the court decides what must be done with it.”

Replies Imagina FX liquidator Christian Bester: “This accusation is vehemently denied by the liquidators and forms part of the dispute that will be decided by the High Court on the 9th February 2021.”

Massyn goes to court to challenge inquiry

Imagina FX was placed in final liquidation in November 2020. A Section 417 inquiry (in terms of the Companies Act) was convened on November 9 to question officers of the company in an attempt to find out what happened to investors’ funds.

Evidence from Carl Japhtes, a former director of Imagina FX, provided some clues as to what happened to the funds, but the picture remains murky.

It seems a substantial portion of funds was channelled into Octox, one of the companies allegedly controlled by Massyn.

Massyn, his wife and sister-in-law were due to give evidence to the 417 inquiry in November, but applied to the Cape High Court to set aside their subpoenas. When this was rejected by the high court, Massyn told the inquiry he was in the process of preparing an application to rescind the order convening the 417 inquiry. He is also challenging the legality of the Anton Piller order which resulted in the seizure of digital data and documents from his home and office.

While Massyn is taking his battle to the courts, his fellow director Andrew Cunningham-Moorat has provided authorities, including the police, with a statement.

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The first meeting of creditors was held on December 18, 2020 when claims of R94.6 million were admitted, but the full amount of funds invested far exceeds this, according to those involved in the case.

One investigator, who asked not to be named, says he is aware of at least three clients who invested about R50 million each.

And it seems at least one investor placed more than R100 million into the scheme.

A clearer picture of the extent of the damage awaits the second creditors’ meeting, when more claims will accounted for.

“Mr Massyn has unfortunately frustrated the process by not assisting us with all the requested documentation and information with regard to the whereabouts of the funds and it would appear that the bulk of the investors’ funds have been misappropriated,” wrote Bester in a note to creditors on November 25 last year.

Pierre du Toit, an attorney at Mostert & Bosman which represents the liquidators of Imagina FX and Praesidium, told Moneyweb that Massyn had exclusive control over all of the funds entrusted to Imagina FX for investment.

“Massyn blatantly refuses to comply with his legal and moral duties to tell investors what he had done with their hard-earned funds. Instead, he utilises all available avenues of delaying tactics to prevent being questioned under oath,” says Du Toit.

“The question is not whether Massyn will have to testify, but only when.”

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FSCA weighs in

In May 2020, the FSCA suspended the licence of Praesidium Advisory Services “due to information received indicating the possible misuse of its FSP [Financial Services Provider] licence.”

This was after receiving complaints from investors alleging that Praesidium Advisory may be operating an unapproved foreign collective investment scheme and soliciting investments from members of the public.

“The complainants are also concerned that Praesidium Advisory offers returns as high as 40% per annum,” reads the FSCA statement.

“The public’s attention is drawn to the fact that the Praesidium Global Fund and/or the Praesidium Mauritius Managed Fund, which is being offered by Praesidium Advisory to members of the public, has not been approved by the FSCA. Upon concluding its investigation, the FSCA will decide whether to withdraw the FSP licence or lift the suspension.”

The FSCA’s head of enforcement, Gerhard van Deventer, tells Moneyweb that a forensic investigation is still ongoing to ascertain how much money was involved and where it went.

“From our investigations so far there does not appear to be any evidence of substantial trading going on within Praesidium or Imagina FX,” he says.

“Money came in through various companies and then appears to have been co-mingled with funds in offshore accounts.”

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The FSCA says it is awaiting information from the Mauritius Financial Services Commission and other foreign regulators to see who controlled the offshore accounts. Also being awaited are statements detailing the transactions executed on the accounts.

The forensic investigators are now attempting to unscramble the Praesidium/Imagina omelette to see if any funds remain to be returned to investors. This is likely to be a long and potentially disappointing process for investors. Anyone with further information on the case can contract Captain Laas, working with Johannesburg Commercial Crimes Unit, at 084 782 2026.

This article was republished from Moneyweb with permission 

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