Criminal investigation into Classic Financial Services and its director gets under way

A criminal case has been opened at the Kempton Park Police Station to investigate the dealings of Classic Financial Services One (Pty) Ltd and its director, Jacobus Stephanus Geldenhuis.

In an exclusive communication with Moonstone, Advocate Adele Janse van Vuuren, senior state advocate at the National Prosecuting Authority (NPA), confirmed that the Germiston Commercial Crimes Unit has been assigned to investigate the case.

The Enforcement Division of the Financial Sector Conduct Authority this week confirmed that it has concluded its investigation into Classic and several people.

“The FSCA is in the process of taking enforcement action against the investigated parties,” the Authority said.

In November last year, the FSCA warned the public “to act with caution” when conducting any financial services-related business with Classic and Geldenhuis.

The FSCA said neither Classic nor Geldenhuis were authorised to provide financial advice or render intermediary services in terms of the FAIS Act.

Geldenhuis was debarred from selling financial services or acting as an adviser in 2009 for dishonesty.

According to the FAIS Act, persons rendering financial services without a licence or without being appointed as representatives are in contravention of the Act. Such a contravention is an offence that carries a fine not exceeding R10 million or imprisonment of up to 10 years.

The FSCA said it conducted a search-and-seizure operation at the premises of Classic in October 2022. The operation was part of an investigation by the FSCA into the business activities of Classic, Geldenhuis, and an authorised financial services provider (FSP) based in Kempton Park. Geldenhuis was previously a director of the FSP in question but resigned in 2010.

“The evidence that the FSCA has collected to date indicates that Mr Geldenhuis may be conducting a Ponzi scheme,” the Authority said at the time.

Co-operation between the FSCA and the Financial Intelligence Centre (FIC) led to the FIC issuing directives to Absa, First National Bank, and Nedbank to freeze the funds in Classic’s bank accounts.

The FSCA also reported the matter to the Asset Forfeiture Unit (AFU), which successfully applied for the preservation orders at the High Court in Johannesburg early this year.

The facts of the case

According to the founding affidavit – signed and submitted to the court in the application by the deputy director of public prosecutions S’Khumbuzo Maphumulo – the banking details for two bank accounts “for the deposit of investment funds” appeared on an investment fund document with the name Classic Financial Services printed on it.

The following words appear at the bottom of the first page: “I hereby give permission for the funds to be placed in a management fund with Classic Invest.”

Geldenhuis opened both these accounts. He was also the sole signatory of these accounts.

Bank records procured by the FSCA showed that from 1 January 2019 to 31 August 2022, about R412 419 440 was deposited into one of these accounts and R83 513 962 into the other. These amounts were made up of multiple payments in round numbers with references that appeared to be identity numbers, the affidavit stated.

As to funds leaving the accounts, the bank records showed that multiple payments were made from both these accounts with references that appeared to be the initials and surnames of individuals.

Referencing the first account, the FSCA found there were no payments for investment purposes or fund transfers to the FSP referred to above.

Regarding the second bank account under scrutiny, the FSCA found there had been various cash withdrawals from this account, as well as two substantial transfers – R36 150 000, using the reference “classic”, and R24 694 452, using the reference “Geldenhuis JS”. Again, the FSCA could not find any payments made to the FSP.

According to the FSCA, Classic was incorporated in 2004. Moonstone asked why the FSCA only went back as far as January 2019 and whether there was any evidence to suggest that misconduct might have been afoot before then.

“As part of our case selection and resource management process, the FSCA Enforcement Division decides on an investigation period that will best balance our objectives and our resource management. We cannot comment on whether any misconduct took place before our investigation period,” the FSCA said.

Preserved funds

On 10 May, a statement released by the FSCA urged those who might have lost money in their dealings with Classic to lodge a claim with the High Court, or the preserved funds would be forfeited to the state.

Janse van Vuuren says the securing of the preservation orders over the preserved funds were necessary steps as a precursor to applications for forfeiture orders as prescribed by the Prevention of Organised Crime Act (Poca).

“This is in line with the mandate of the AFU, which is to inter alia target property associated with or obtained through unlawful activity and thereby removing the financial benefit which criminals derive from committing crimes. The ultimate aim of Poca is for such property to be forfeited to the state.”

She explains, however, that the AFU recognises that innocent victims may have an interest in such property.

“In this specific instance, the proposed process as described in the FSCA communication of 10 May 2023 would enable such innocent victims/investors to apply for the exclusion of their interest in the preserved funds to be forfeited.”

Janse van Vuuren says, to date, one forfeiture application has been filed. She adds that the AFU is in the process of finalising the second application for filing.

“The first application has not yet been set down for hearing and as such the order sought in that application (which makes provision for the appointment of a curator bonis and for the filing of exclusion applications by investors) has not yet been granted or published in the Government Gazette.”

According to the FSCA, Classic had more than 1 000 clients.

Koster Attorneys in Pretoria will be lodging claims at the Pretoria High Court on behalf of 25 to 30 people within the week. According to Jaco Koster, of the clients represented by the firm, most are pensioners who entrusted Geldenhuis with their life savings. He says single investments ranged from R1 million to R10m.

Liquidation

Claim applications need to be filed no later than 45 days after publication of the forfeiture order in the Government Gazette, but a recent twist in the tale has cast temporary doubt on the way forward for possible claimants.

Classic was wound up (liquidated) by order of the High Court in Pretoria on 30 May.

Janse van Vuuren says this development will have a significant impact on the AFU proceedings.

“In these circumstances, we are in the process of consulting with the appointed liquidators, who represent the entire body of creditors of Classic Financial Services (One) (Pty) Ltd, including the investors.

“The State Attorney has been instructed to advise all investors who have contacted AFU to await the outcome of these consultations before filing any further applications for the exclusion of their interest in the preserved funds until such time as there is clarity on the way forward.”

In the interim, she says investors are also encouraged to file claims with the liquidators.

“They do not need the assistance of any legal representatives to do so. The FSCA is aware of this development and can provide investors with the contact particulars of the liquidators.”