JOHANNESBURG – The South Gauteng High Court will on Thursday hear that Carmol – a ponzi scheme that promised returns of between 72% and 96% a year – is insolvent and should be liquidated.
The South African Reserve Bank (Sarb) is bringing the application, after an inspection by EY confirmed that Carmol was illegally conducting the business of a bank and a subsequent report from KPMG has found it is unable to cover its liabilities, which could be as high as R1 billion.
The “business of a bank” is simply described as soliciting deposits from the general public.
While Carmol claimed to be involved in selling and distributing petrol and/or diesel products, “a regular feature of the Carmol business was, in fact, the carrying on of an unlawful deposit-taking scheme”, notes Registrar of Banks, Renè van Wyk in court papers.
Carmol’s directors include one Yunus Moolla and his wife, Fathima Carawan.
In February, the Sarb ordered Carmol to repay money collected from the public and appointed KPMG as the repayment administrators.
Needless to say, Carmol has failed to do so and it appears that Moolla and Carawan have fled to Dubai.
Massive liability outstanding
KPMG estimates that roughly R192.6 million can be recovered from Carmol, in the form of cash and other assets.
But Carmol’s liabilities exceed its assets by at least R385.3 million, court papers show, and the number could be much greater depending on the impact of the distinction between void and voidable agreements.
The lower amount owed to investors is around R538 million, with the higher amount closer to R1.4 billion.
As such, KPMG has found that Carmol does not carry on business and is unable to generate profit to cover its asset shortfall, declaring it “technically and commercially insolvent”.
Van Wyk has also applied for the sequestration of Carawan and Moolla.
Meanwhile, Dave Randles, an attorney at Durban-based TMJ Attorneys, has agreed to help some investors pursue claims against Carmol. Randles is working with a committee of seven investors who could be representing more than 300 additional investors.
“The dividend to creditors will depend on how many creditors can prove claims, and how much a liquidator can recover,” Randles tells Moneyweb. “All I can do is guide investors through the process.”
According to emails between investors, Randles has requested that investors make a minimum payment of R100 each into TMJ’s trust account in order for him to act on their behalf.
A handful of creditors have lodged a case with the SAPS, says Randles, but the police can do very little at this stage considering that reports from both EY and KPMG are confidential and a forensic investigation would need to be undertaken.
With the support of investors, Randles has approached an independent liquidator and will – if the court grants the liquidation order – seek a joint appointment, whereby the independent liquidator may have to work together with the Reserve Bank-nominated liquidator.
“Moolla is apparently living in Dubai and I don’t know what attempts have been made to bring him back here,” says Randles, who adds that Moolla was supposed to appear in the Durban Magistrate’s Court this week to defend an earlier matter pertaining to fraud, but the matter has been adjourned to be heard at a later date.