The FSCA has fined the directors of the Praesidium Group a total of R29 million and debarred them for between 10 and 20 years after its investigation into the group’s entities found they contravened various financial sector laws.
The Authority said it will bring its findings to the attention of the prosecuting authorities, because it seems likely that several offences have been committed, including fraud and theft.
The investigation, which started in 2020, looked into investment schemes involving Praesidium Advisory Services (Pty) Ltd, Praesidium Wealth (Pty) Ltd and Praesidium Sentinel (Pty) Ltd. These entities have since gone into liquidation, and their FSP licenses have lapsed.
Note: These entities are not connected with authorised FSPs Praesidium Capital Management or Praesidium Assurance and Investments.
The investment schemes, which began operating in 2015, promised and produced extraordinary returns – exceeding 40% a year – for about four years.
Returns started going south in 2020, but investors were told this was because of Covid-induced market volatility.
In May 2020, the FSCA suspended the licence of Praesidium Advisory “due to information received indicating the possible misuse of its FSP licence”. This was after it received complaints from investors alleging that Praesidium Advisory may be operating an unapproved foreign collective investment scheme.
The Authority said two funds offered by Praesidium, its Global and Mauritius Managed funds, were not approved.
The FSCA placed the Praesidium entities under statutory management in September 2020 after the two parties signed an enforceable undertaking. Praesidium also undertook to repatriate client funds held offshore to a South African bank account for distribution to clients.
However, at the time, the FSCA said this did not mean that clients would recover their investments. “In fact, based on the investigation to date, there is a strong indication that the majority of clients’ funds is unlikely to be recovered.”
It seems that individual investors put tens of millions of rands into Praesidium. In January last year, Theo van den Heever of D&T Trust, who was appointed as the provisional liquidator of Praesidium, estimated that Praesidium could have controlled more than R1 billion. But Van den Heever said only R100 000 was available when he checked Praesidium’s bank account in October 2020.
What the FSCA’s investigation found
The FSCA found that Praesidium Advisory did not have the correct FSP licence to advise members of the public to invest in forex instruments. It also did not have the correct licence to receive client funds for the purposes of investing in forex instruments.
According to the FSCA, the directors of the Praesidium Group – Andrew Cunningham-Moorat, Brett Bukes and Craig Massyn – aided, abetted, induced, incited or procured the entities to contravene the relevant financial sector laws.
Praesidium Advisory paid over the funds it received to two companies, Octox (Pty) Ltd and Imagina FX (Pty) Ltd, which were not authorised FSPs, and therefore could not lawfully receive client funds and/or act as an investment manager of clients’ funds. The FSCA said Massyn controlled both companies.
According to the FSCA, Massyn controlled clients’ bank accounts via Octox and traded their funds via Imagina’s trading platform.
Based on the FSCA’s forensic analysis, only 19.4% of clients’ funds was actually traded on the trading platform. The balance of the capital was paid back to clients, including Imagina clients, as investment returns and/or capital withdrawals, paid to the Praesidium Group of entities for operational expenses, and paid to the directors.
Massyn provided Cunningham-Moorat and/or Bukes with the trading percentage returns every month, and they, in turn, declared them to clients.
Praesidium Advisory’s statutory manager found that the positive trading returns Massyn declared “could not be remotely possible”, because Massyn was making losses on the trading platform.
Additionally, the balances reflected in the trading account statements produced by Massyn indicated that there was insufficient money on the trading accounts. “It would therefore appear that Massyn was operating a scheme similar in nature to a Ponzi scheme.”
Fines totalling R29m
Based on the findings of the investigation, the FSCA made a preliminary decision on the sanctions that would be imposed. The investigated individuals were provided with an opportunity to make submissions on the facts in the investigation report and the preliminary sanctions.
Thereafter, the FSCA decided to impose the following sanctions on the directors:
- Massyn: a fine of R20m and debarment for 20 years;
- Bukes: a fine of R6.5m and debarment for 10 years; and
- Cunningham-Moorat: a fine of R2.5m and debarment for 10 years.
KIs also fined and debarred
The FSCA also fined Praesidium Advisory’s two key individuals, Cindy Lee Schuster and Ryan van Niekerk, R300 000 each and debarred them for five years.
“Schuster testified under oath that she had resigned six weeks after being appointed. However, a forensic analysis of the evidence she submitted demonstrated that she had not resigned. She continued to act as a key individual after the alleged resignation and Praesidium Advisory continued its unlawful business during her tenure. The FSCA is of the view that she did not have the operational ability to effectively oversee the business of the FSP,” the Authority said.
“Van Niekerk signed a document that was presented to clients that contained misleading and incorrect information. This document created an impression that Praesidium Advisory was appropriately licensed to conduct its business,” the FSCA said.
Where is our money and where is justice for the victims
This was an outfight Ponzi scheme or even worse , maybe outright theft
Yet the various regulators and law who are meant to protect us just dragging their feet and no real justice .
29 million fine is peanuts for 2.2billion rand stolen and the reality is the downs have gone to whom ??? Not the poor investors