Did the FSCA overstep in Banxso’s liquidation battle?

Did the FSCA break the law by handing over investigation records in a court case against Banxso (Pty) Ltd? That’s one of the questions Judge Andre le Grange will decide when he hands down his judgment.

Banxso wants certain evidence thrown out of court – evidence its former client used to back a provisional liquidation application. The company claims the FSCA acted unlawfully by sharing confidential interview transcripts. It argues the subpoena used to obtain the material wasn’t valid in motion proceedings and that the FSCA breached confidentiality laws.

But the FSCA stands by its actions. In its heads of argument dated 24 April 2025, the Authority says the subpoena was valid, and sharing the information was legal and within its mandate.

Allegations against Banxso started in February last year after the company was linked to deepfake adverts featuring Elon Musk and Johann Rupert. The ads, promising huge returns, were tied to Immediate Matrix – a name already flagged by the FSCA.

Banxso denies any role in the campaign.

Complaints poured in, prompting an FSCA investigation. The Authority found aggressive sales tactics, false promises, poor client vetting, and serious client losses.

In October 2024, the FSCA provisionally pulled Banxso’s FSP licence, citing risks to clients. It alerted the Financial Intelligence Centre (FIC) and the Asset Forfeiture Unit. On 2 October, the FIC froze seven of Banxso’s bank accounts under the Financial Intelligence Centre Act, citing suspicious activity.

A few days later, the National Director of Public Prosecutions (NDPP) secured a preservation order under the Prevention of Organised Crime Act, to further block access to funds. Although the High Court lifted that order in November, Banxso is still barred from using funds for anything other than client transfers to approved providers.

The case escalated on 25 October, when former investor Carol Wentzel filed for Banxso’s provisional liquidation, joined by 10 others who alleged insolvency. The application was heard on 5 and 6 May before Judge Le Grange in the High Court in Cape Town.

Banxso, the first respondent, and the FSCA, the third respondent, have set out their positions in their respective heads of argument.

Banxso: ‘evidence was unlawfully obtained’

Banxso wants key evidence thrown out in its fight against the provisional liquidation bid – and says the way it was obtained breaks both court rules and financial sector laws.

In its heads of argument, Banxso argues that interview transcripts from the FSCA, submitted in reply by Wentzel (the applicant), are inadmissible. It says the material was obtained unlawfully.

Central to Banxso’s argument is that the transcripts were subpoenaed under Rule 38 – a rule that only applies to trials, not motion proceedings. Banxso says this makes the subpoena invalid and any evidence gathered through it inadmissible.

It also claims the FSCA breached strict confidentiality obligations set out in the Financial Sector Regulation Act (FSRA). According to Banxso, the FSCA explicitly told interviewees that the information would remain confidential and was limited to internal regulatory use. Sharing it in court, Banxso says, was not only unlawful – it could be a criminal offence under section 272 of the Act.

Banxso further argues that the information was taken out of context and shared without the chance to clarify or correct it, despite the FSCA previously committing to give it that opportunity.

It also accuses the FSCA and the applicant’s legal team, Mostert & Bosman (M&B), of knowingly flouting the rules. Banxso says the applicant held back the evidence until reply – an unfair move that denied Banxso the ability to respond properly in its answering papers.

The bottom line, Banxso says, is that its confidential business model was exposed to the public and possibly to competitors without justification. For this reason, it is asking the court to strike the evidence and award it legal costs, including the fees of three counsel.

FSCA denies any breach of confidentiality or law

The FSCA has distanced itself from the liquidation proceedings against Banxso, maintaining that it has remained neutral throughout and complied fully with the law in handing over documents to Wentzel’s attorneys.

In its first affidavit, the FSCA stated it was not taking a position on the provisional withdrawal of Banxso’s licence or the liquidation application. A second affidavit was filed in response to Banxso’s claim that the FSCA had acted unlawfully by providing information under subpoena.

According to the FSCA, the documents – referred to as “the FSCA material” – were handed over in compliance with a valid, binding subpoena. The Authority noted that Banxso never applied to have the subpoena set aside, either before or after the disclosure. Citing Campbell v Kwapa, the FSCA argued that a subpoena remains enforceable in motion proceedings unless overturned by a court – and it was under no legal duty to ignore it.

Banxso’s core objection is that the material was confidential and should not have been disclosed. The FSCA rejected this, saying the confidentiality restrictions cited by Banxso applied only to the recipients of an FSCA notice – not to the FSCA itself.

Banxso also alleged that FSCA officials had assured interviewees their responses would be kept confidential. The FSCA denied this, stating that although interviewees were advised of their rights under the FSRA, including protection against self-incrimination, no promises of confidentiality were made.

As to Banxso’s claim that the FSCA had contravened section 251(1)(c) of the FSRA – which restricts the disclosure of regulatory information unless authorised under specific provisions – the Authority denied this, arguing that its actions were justified under multiple grounds listed in section 251(2)(a), including:

• performing its functions under financial sector laws;
• complying with legal proceedings;
• alerting clients to financial risks; and
• acting in the public interest.

Regarding Banxso’s claim that it was denied an opportunity to clarify or correct the information before it was shared, the FSCA denied any such agreement existed. It noted that it had issued a formal notice (Notice No. 2024/05/15718) after the interviews, requesting follow-up information on the same topics. Banxso responded in writing on 20 May 2024. By the time the FSCA complied with the subpoena, it was satisfied that no further clarification was needed.

The court has reserved judgment in the provisional liquidation case, with no ruling date set.

Meanwhile, dozens of individuals claim losses totalling millions of rands. Although the verdict is crucial for these investors, its impact extends further – shaping how financial regulators such as the FSCA handle investigative information in legal disputes.