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Kijani update: Brighton SPC placed in controllership

As questions arise around the valuation of assets.

Cape Town – The Cayman Islands Monetary Authority (CIMA) on Monday announced that it had placed the Brighton SPC in controllership. Two representatives of PwC Finance & Recovery have been appointed to assume control of the affairs of the fund.

The only active cell within Brighton SPC is the Kijani Commodity Fund, which is suspected of being unable to verify its assets.

The decision from the CIMA to put the Brighton SPC in controllership follows from a forensic examination of the fund conducted by PwC. Kijani itself has been in voluntary suspension since 18 March.

The suspicions around Kijani were first raised due to its almost unerringly positive performance record. Out of the 51 months it had been operating up until April this year, it had showed a positive return for 49 of them. In only one month had it been negative, while one month showed a zero return.

The fund claimed that it was able to produce these returns through using specialist alternative strategies, particularly commodity trading arbitrage. However the forensic audit was instigated by the CIMA after shortcomings were identified in the financials of the fund’s underlying asset, Kijani Resources Limited. While the audited accounts painted a rosy picture, a deeper analysis suggested that there was little assurance on the assets Kijani claimed to have.

Since all of Kijani’s assets are unlisted or infrequently traded, apart from what it holds in cash, the board’s directors were responsible for valuing them. While the fund’s underlying assets were audited and received an unqualified audit report from an independent audit firm based in the UK, it appears that those valuations were not thorough.

This has raised questions about the independence of the board and whether it had misrepresented asset values.

 

Kijani history

Kijani was relocated to the Caymans from Mauritius between November last year and February 2015. In Mauritius it was a sub-fund of the Four Seasons PCC, which was managed by the David Cosgrove and Cobus Kellermann-owned RDL Management and administered by Belvedere Management.

When Brighton SPC was established in May 2014, RDL Management subscribed for all of the management shares. That gave it effective management control of the umbrella fund into which Kijani moved. That however changed at some point, with RDL Management passing over its management shares in Brighton SPC to UK-registered and regulated Straffan Asset Management, the investment adviser to Kijani.

Although this ended the direct connection between RDL and Kijani, there have been suspicions that Straffan is merely acting as a front for the Mauritian entity. This is a contention that both Kijani and Straffan deny. Straffan’s head of marketing, Nicolas Egger told Moneyweb that: “In terms of the relationship between Belvedere/RDL and Straffan, the answer is very simple and unequivocal. There is none.”

What may or may not be true about this relationship could however be fairly academic to investors who now face a potential three month wait to hear what will happen to their money.

 

What can investors expect?

Unfortunately for investors, the most likely outcome of PwC’s controllership is that the fund will be liquidated. Hopefully that will result in their capital being returned to them, but until such time as there is more clarity on the status of Kijani’s assets, it’s impossible to tell what any potential payout might be.

Kijani has received clean audits every year since 2011, which either suggests that there is reason for optimism or that the auditors have been systematically duped from the start. If it proves to be the latter, some tough questions will have to be asked about the oversight role that auditors and custodian banks should have been playing.

It is also worth noting that while BDO Cayman Islands is listed as the fund’s auditor on Kijani’s website, the firm has confirmed to Moneyweb that no new engagement agreement has been signed with the fund. The audit of Kijani Resources Limited, the underlying asset, was also not conducted by BDO.

Kijani was approached for comment through its PR agency, however no feedback had been received by the time of publishing.

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Brighton SPC ultimately owns shares in at least four British firms – Eligere Investments Plc, Fulhold Pharma Plc, Emerging Market Minerals Plc and Teyuteme Oil Plc – whose shares are listed on stock exchanges in Denmark (GXG Markets), England (AIM), and Germany (Dusseldorf). The companies all lose money, do nothing other than enter into bizarre related-party transactions that appear to have no substance (which is a trademark of the Belvedere Group), and there is no liquidity in the shares. Despite this, the Net Asset Value of Brighton SPC’s Kijani Commodity Fund relentlessly goes up, allowing the managers to take out a 25% performance fee (that is clearly based on false NAVs). Prior to its suspension after OffshoreAlert’s exposé on March 17th, investors’ redemptions were paid from other investors’ money (because there have never been any profits), which is a defining characteristic of a Ponzi scheme.

This should be enough of a “smoking gun” to convince the most ardent naysayers.

Brighton SPC’s ownership of clearly-fraudulent publicly-listed British firms were detailed extensively in a 4,500-word article that was published by OffshoreAlert on May 22nd. Belvedere essentially comprises a network of mainly British, Irish and South African nationals – several of them expatriates living in Spain, Dubai and Gibraltar – committing fraud on a grand scale. Many of these individuals were identified in our May 22nd story. One of them bought this ‘superyacht’ with money defrauded from investors: http://www.superyachttimes.com/yachts/details/1601.

One more thing: investors in Brighton SPC, including its Kijani Commodity Fund, will get back nothing in a liquidation. There will literally be nothing to distribute to investors and creditors in a liquidation has settled. Brighton SPC’s assets are all worthless. All of the cash invested by investors was stripped out through fees, expenses, and related-party transactions with no substance.

“……..the auditors have been systematically duped from the start.” This is impossible. The auditors are Chartered Accountants; they do independent verifications. They study and pass exams showing that they can do this. If you need to, please check The South African Institute of Chartered Accountants, he greatest professional organisation in the world.

Perhaps the auditors were bribed? Seems to be a common activity these days – think FIFA.

I long ago learned that many auditors, including those from big firms, will sign off on anything. Many frauds exposed by OffshoreAlert have audits by well-known firms. The assets of Belvedere’s Brighton SPC comprise solely or mainly shares in British publicly-listed companies that have no substance and which are clearly vehicles for fraud. Any auditor who assigned any meaningful value to these shares is either grossly negligent or corrupt. There is no in-between. Many well-known auditors, law firms, banks, etc. provided services to Belvedere companies, despite their crudely fraudulent nature. It demonstrates how murky international finance really is. Many companies will do anything for a fee. Investors see names like BDO, Ernst & Young, etc. and are comforted by this. They shouldn’t be.

Re. “Kijani has received clean audits every year since 2011”. That’s not true. I have copy of BDO’s 2013 audit of The Four Elements PCC Limited, of which Kijani was a cell at the time, and BDO offered a “qualified opinion” and said the basis for the qualification was: “The separate financial statements include an amount of Euro 33,763,323 representing investments, cash and cash equivalents, loans and interest receivable. We were unable to obtain sufficient appropriate audit evidence as to its existence as at reporting date. Consequently, we were unable to determine whether any adjustment to this amount was necessary” and “The separate financial statements include an amount of Euro 32,892,696 representing investments, loans and interest receivable. We were unable to obtain sufficient appropriate audit evidence as to its recoverability as at reporting date. Consequently, we were unable to determine whether any adjustment to this amount was necessary.” So, to sum up, BDO could find no evidence that EUR 33 million even exists and can’t say whether another EUR 32 million is recoverable or not. Patrick: Why did you report that Kijani had a “clean audit” when it’s simply not true? You have published similar inaccuracies in previous stories and they are always in favour of the fraudsters. It’s bizarre, to put it kindly.

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