Cape Town-based fintech Kastelo (Pty) Ltd is “leaning towards” not appealing a judgment that upheld a South African Reserve Bank blocking order freezing approximately R13 million in a bank account, although it has not yet made a final decision.
The company said it continues to believe its case had strong legal merit, but it is weighing whether an appeal would undo the harm caused by the blocking order.
The High Court in Johannesburg found that the SARB’s Financial Surveillance Department (FinSurv) had reasonable grounds to suspect that the authorised financial services provider had contravened the exchange control rules in connection with its intermediated, loan-funded crypto-arbitrage model.
The judgment, delivered on 28 July 2026, dismissed Kastelo’s substantive challenge to the order. In January 2026, the same Court dismissed its urgent application without considering the merits.
Read: Ruling leaves key exchange control questions unresolved in crypto arbitrage dispute
As Moonstone reported, the dispute between Kastelo and the SARB raises questions about how South Africa’s exchange control rules apply to intermediated, loan-funded offshore crypto trading. These include how individual foreign exchange allowances may be used, whether clients are investing as principals for their own risk and benefit, and how the provision of loans and the use of an intermediary affect the regulatory assessment of offshore transactions.
The July judgment did not find that Kastelo had committed the suspected contraventions or finally determine whether its crypto-trading model complies with the Exchange Control Regulations. Instead, it found that the threshold required to issue a blocking order, reasonable grounds to suspect a contravention, objectively assessed, had been met.
In response to questions from Moonstone, Kastelo characterised the judgment as dealing with the “narrow, procedural question” of whether the SARB followed the correct process in issuing the blocking order. It emphasised that the Court did not find that Kastelo had contravened the Exchange Control Regulations or make a finding on the legality of its business activities.
The blocking order
FinSurv issued the blocking order on 24 November 2025. It prevented withdrawals from Kastelo’s account with Access Bank, in which about R13m stood to the company’s credit.
The order was issued under Regulations 22A and/or 22C of the Exchange Control Regulations. Regulation 22A permits money to be attached or blocked where it was involved, or is suspected of having been involved, in a contravention or suspected contravention. Regulation 22C also permits money not suspected of having been involved in the contravention to be blocked to make up the amount involved or suspected of having been involved.
A blocking order is a temporary, preservatory measure and does not constitute a final finding that a contravention has occurred. The Court accepted that its purpose is not limited to preventing the dissipation of funds but includes preserving funds while FinSurv investigates suspected contraventions and establishes their extent.
Kastelo’s challenges to the order
Kastelo challenged the blocking order on numerous administrative-law grounds, including procedural unfairness, inadequate reasons, irrationality, errors of fact and law, unreasonableness, and a lack of authority to issue the order.
The Court accepted that the issuing of a blocking order constitutes administrative action under the Promotion of Administrative Justice Act (PAJA). It held, however, that the Exchange Control Regulations provide a specific review framework through Regulation 22D, read with section 9(2)(d)(i) of the Currency and Exchanges Act. In the Court’s view, an aggrieved party must seek a remedy through that framework rather than relying solely on PAJA’s ordinary grounds of review.
Section 9(2)(d)(i) provides that a court may not set aside a blocking decision unless it is satisfied that the decision-maker did not act in accordance with the relevant Regulations, did not have reasonable grounds for making the decision, or that the grounds for the decision no longer exist.
The critical threshold was therefore whether there were reasonable grounds to suspect a contravention, assessed objectively. Proof of an actual contravention is not required at the blocking stage. Suspicion, the Court noted, arises at or near the start of an investigation; prima facie proof comes later.
On the evidence before it, the Court found that threshold had been met. André Malherbe, the FinSurv official who issued the order, considered information from Access Bank (which had conducted its own forensic review and reported suspicious transactions), Cross Border Foreign Exchange (CFE) data, clients, whistle-blowers, and his own investigation. He assessed the material cumulatively rather than accepting individual complaints at face value.
Kastelo argued that the SARB was bound by the written reasons provided on 15 December 2025 and could not supplement, improve, or reconstruct them in Malherbe’s answering affidavit.
The Court accepted that an organ of state must stand or fall by the reasons it gives for its decision. It found, however, that Malherbe’s affidavit did not introduce new grounds or reasons for the blocking order. Rather, it provided further factual substantiation, evidentiary support, and explanation for the grounds and reasons contained in the December letter.
It held that supplying the fuller information was permissible. Without detailed answering affidavits, the SARB would not be able to demonstrate the reasonable grounds for its suspicion, Kastelo would not be able to contest those grounds, and the Court would not be able to evaluate them.
The CFE results disclosed a reasonable suspicion of exchange control contraventions involving at least R4 billion. The blocking order itself applied only to the R13m then standing to Kastelo’s credit.
The Court described the overall suspicion as “overwhelming” and noted that there was no countervailing evidence on the CFE data.
The model under scrutiny
FinSurv’s concerns focused on whether Kastelo’s platform used clients’ Single Discretionary Allowances (SDAs) and Foreign Investment Allowances (FIAs) for the company’s own benefit rather than for investments made by clients as principals for their own risk and reward. Malherbe’s affidavit alleged that many clients had little understanding of the transactions executed in their names and were often unaware that foreign accounts had been opened.
FinSurv also characterised the loans advanced by Kastelo to enable clients to access those allowances as suspected simulated transactions designed to circumvent exchange controls.
Access Bank material included examples of clients earning roughly R15 000 a month who had received loans of about R249 000. FinSurv viewed the affordability assessments as questionable and the clients as potentially over-indebted.
Additional suspicions related to Kastelo’s role as a treasury outsourcing company. These included possible breaches of the Currency and Exchanges Manual: buying or selling foreign currency for its own account, acting as principal rather than intermediary, conducting transactions without clients’ full knowledge or participation, and failing to ensure that transactions were concluded and settled directly between the authorised dealer and the client.
Kastelo maintained that its model was lawful. It says clients granted it discretionary mandates, all externalisations used individuals’ legitimate SDA and FIA entitlements, and its algorithmic model required value to be returned to South Africa in rand (often with a profit) at the end of each trading cycle and therefore did not involve a permanent export of capital.
The Court rejected Kastelo’s argument that the repatriation of value in rand answered FinSurv’s concern about the suspected contravention. The foreign currency itself, Malherbe’s evidence indicated, did not return. The Court made clear, however, that this finding went only to the existence of reasonable grounds for suspicion; it did not rule generally on whether rand repatriation can satisfy the exchange control requirements.
Kastelo told Moonstone on 18 August that, “out of an abundance of caution”, it has voluntarily paused its arbitrage services, which it described as the service objected to by the SARB. It said it continues to operate its other products and services under its existing licences and authorisations.
No prior hearing required
Kastelo argued that the blocking order was procedurally unfair because it had not been given notice of the proposed action or an opportunity to make representations before its account was blocked.
The Court rejected this argument. It held that a blocking order is temporary and preservatory in nature and that established case law does not require the SARB to give prior notice or afford audi alteram partem before issuing such an order. Prior notice could defeat the preservatory purpose of the measure.
The Court distinguished the blocking of funds from their eventual forfeiture. It held that audi applies before a forfeiture order is made, after the investigation and a final finding that exchange-control contraventions occurred. Malherbe was therefore not obliged to hear Kastelo before issuing the blocking order.
Access Bank’s role did not amount to blanket permission
Kastelo argued that it could rely on Access Bank’s role as an authorised dealer in relation to the transactions. The Court rejected the proposition that an authorised dealer is empowered to approve all or unlimited transactions, or to grant every permission required under Regulation 3(1).
It held that authorised dealers may approve foreign-exchange transactions only within the conditions and limits prescribed by the SARB and the applicable exchange-control framework.
Kastelo also disputed Malherbe’s authority to issue the blocking order.
Malherbe testified that the Minister of Finance had delegated the relevant powers and functions to designated SARB officials and authorised FinSurv signatories under Regulation 22E.
The Court accepted his evidence that he was the designated functionary who issued the order and found that he was authorised to exercise the blocking powers in this case.
What remains unresolved
The judgment does not find that Kastelo committed the suspected contraventions. It decides only that reasonable grounds for suspicion existed when the blocking order was issued.
Nor does it determine whether an intermediated, loan-funded crypto-arbitrage model of the kind operated by Kastelo complies with the Exchange Control Regulations. That broader regulatory question – including how foreign exchange allowances may be used when activity is structured through a platform and funded by loans, and what role clients’ knowledge, participation, and assumption of risk play – remains open.
FinSurv has up to 36 months from the date of the blocking order to complete its investigation. Any subsequent decision to forfeit funds would require a further process in which Kastelo would be entitled to a hearing. If contested, that decision could generate further litigation.
Application for leave to appeal seems unlikely
Kastelo told Moonstone it was “leaning towards” not applying for leave to appeal, although it had not yet made a final decision.
It said it continues to believe its case had strong legal merit and its reason for approaching the Court were justified. A decision not to appeal would not reflect the strength of its case but would be a commercial decision.
“We are evaluating whether a successful appeal would be able to undo the harm already caused by the blocking order, or whether our efforts will be better directed at current operations, new developments, continued client service and where appropriate, continued engagement with the SARB.”
It has been widely reported that Kastelo Group was co-founded by Mark Burke, the Democratic Alliance’s spokesperson on finance and federal finance chairperson. His brother, Nicholas, is the company’s chief executive.
Kastelo said Mark Burke has not been involved in the company’s day-to-day operations since May 2024 and stepped down as group chairperson in February 2026. Although he retains an indirect ownership interest in the group, he is no longer involved, either in an executive or non-executive role, Kastelo said.
