The Financial Sector Conduct Authority has made the provisional withdrawal of the FSP licence of online trading platform Banxso (Pty) Ltd final.
The Authority has also provisionally withdrawn the licence of another South African trading platform, Afrimarkets Capital (Pty) Limited. The provisional withdrawal means Afrimarkets may not conduct financial services business or receive any additional funds from its clients.
“Afrimarkets and Banxso are linked through common directorships and key persons and conducted their financial services business in a very similar manner,” the FSCA said in a statement on Friday.
Banxso and Afrimarkets Capital have faced allegations related to their business practices, particularly in the realm of deceptive marketing and potentially fraudulent activities.
Media reports have alleged that Banxso and Afrimarkets benefited from deepfake advertisements featuring well-known figures such as Elon Musk and Johann Rupert. These adverts falsely promise substantial returns from a small investment.
The adverts reportedly directed users to platforms such as Immediate Matrix, which then funnelled them to Banxso’s or Afrimarkets’ platforms. Some users claimed they were enrolled automatically, without their consent. Investors have reported significant financial losses.
Banxso and Afrimarkets have denied any links to the deepfake ads, as well as allegations of misappropriating or improperly administering client accounts.
The FSCA provisionally withdrew Banxso’s licence in October last year, following the preliminary findings of an investigation.
“Banxso was afforded an opportunity to respond to the provisional withdrawal notice. It was also afforded an opportunity to provide reasons to the FSCA as to why the provisional withdrawal should be lifted or not be made final. The FSCA considered the preliminary findings, as well as Banxso’s submissions in respect of the provisional withdrawal, and has taken the decision to finally withdraw the licence of Banxso,” the Authority said.
The FSCA is of the view that Banxso materially contravened various financial sector laws and no longer meets the fit and proper requirements to be a financial services provider.
The investigation findings included that Banxso misappropriated client funds, provided false and/or misleading information to clients and to the FSCA, and did not act in the best interests of clients, the statement said.
The FSCA said its decision to provisionally withdraw Afrimarkets’ licence is based on the preliminary findings of an investigation into Afrimarkets’ activities and its possible association with deepfake adverts.
The Authority said it is also concerned about the apparent aggressive and high-pressure sales techniques used by Afrimarkets’ agents when selling financial products to clients, promises of unrealistic returns, the failure to conduct the required risk and needs analyses before placing clients in specific financial products, and the losses suffered by clients.
The media reports similarly accused Banxso of employing high-pressure sales strategies. Former employees and clients claimed that “success managers” pushed clients to deposit additional funds, often with promises of recovering losses or accessing better trading opportunities.
The FSCA emphasised that the withdrawal of Afrimarkets’ licence is provisional and is based on provisional findings. Once the investigation is finalised, the FSCA will consider the investigation and any submissions by Afrimarkets.
Afrimarkets and Banxso respond
Banxso said it disputes the conclusions reached by the FSCA and will exercise its right of recourse under the Financial Sector Regulation Act, which include applying to the Financial Services Tribunal for a reconsideration of the decision.
“We are disappointed by the FSCA’s decision, which in our view does not reflect the substantial engagements with and representations to the FSCA,” the company said in a statement.
Banxso said it has improved its systems and compliance frameworks and “remains committed to the highest standards of client care and regulatory integrity”.
Afrimarkets said it has not received formal findings or specific allegations and is engaging with the regulators.
“We are seeking clarity on these measures and are working closely with senior legal counsel to consider all available remedies to protect our clients and stakeholders,” the company said in a statement.
Regarding the link between the two companies, Afrimarkets said although some stakeholders may overlap, Banxso and Afrimarkets are distinct legal and operational entities with no shared platforms, client accounts, or regulatory systems.
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