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Two forex trading companies go belly-up, owing investors upwards of R1bn

Praesidium and Imagina FX were placed in liquidation last year after clients’ demands for refunds went unanswered.
Some say the number is closer to R2bn. Image: Shutterstock

As the bells were ringing in the 2019 New Year, Praesidium Global fired off a self-congratulatory newsletter to investors announcing that its Managed FX Fund had clocked up an astonishing return of 43.5% for the previous year.

Returns like this were apparently par for the course, ranging between 43.5% and 74.3% for each of the previous four years.

The newsletter goes on: “’Too good to be true’ is a statement we hear every day when new clients first learn about the kind of returns the Fund has been delivering year after year. And when comparing five-year total returns of Praesidium, to the performance of more familiar investment products, who could blame them!”

Praesidium apparently did this by investing in forex markets, managed by “an experienced team of traders”.

The author of the newsletter was Gary Wilde, Praesidium Global’s Indian Ocean Islands director, based in Mauritius.

As it turns out, it was too good to be true.

In June 2020, Praesidium Wealth investors received a newsletter with some alarming news. Covid was a “black swan” event that had created unprecedented volatility in world markets, resulting in a 40% drawdown in funds under investment. Praesidium, like many other investment companies, was not immune to this volatility.

But there was no need to worry, clients were told, as plans were being put in place to recover from these losses.

Some clients were less than satisfied at this sudden turn of events. They tell Moneyweb this was the first time in five years the company had reported losses. Some feared their entire investment was in danger of disappearing altogether.

Praesidium reassured investors that business continuity plans had been put in place. It also promised better and faster communications with clients, who were understandably concerned about the deteriorating trading results. The company decided to waive its usual performance fees on trading accounts until the drawdown losses were recovered.

The trading team also volunteered to put in extra hours of trading – which veteran traders would recognise as a sign of desperation, since more trading does not necessarily mean more profits (often, the reverse).

Big funds at risk

One investor contacted by Moneyweb has $1.9 million (R28.9 million) at risk in the company. Another overseas-based investor sunk $900 000 (R13.7 million) into the fund.

“We were introduced to the Praesidium by a friend when we were on a trip to Mauritius, with promises of returns of about 3% a month,” says the investor, who asked not to be named. “We initially put in $400 000, which went into a bank in Mauritius, and then later put in another $500 000, which went to Cyprus.”

Everything seemed to be going swimmingly for the first year. The investor was able to log into the company’s investment platform, which reflected steady growth in the account. It was only when she received the “black swan” letter notifying her of a 40% drawdown in the trading account that she started to ask questions. She was told that her funds were being traded through a platform called FXPrimus in Cyprus. She reached out to FXPrimus in Cyprus, which apparently had never heard of Praesidium.

It wasn’t looking good. An investigator who looked into this could find no event on the forex market that would account for a 40% drawdown.

It was the same story for Michael Suskin, a Pretoria-based entrepreneur who is owed about R12 million from an associated company called Imagina FX, under the direction of Cape Town-based Craig Massyn, the lead forex trader.

“Craig [Massyn] was an associate of mine,” says Suskin, a registered financial consultant who attended several courses in forex, but after hearing of the possibility of earning 2-2.5% a month, decided to invest with Imagina.

“I started investing in 2015 and I was seeing awesome returns. I asked Craig Massyn a lot questions before I started investing, and once I was satisfied, I placed my first investment in the first quarter of 2015, and made a few more allocations after that. I first got a bit concerned in March 2020 when I noticed a drop in the returns, which was the first time there was a drop since I started investing in 2015.”

Read: A ‘spaculative’ investment at best (Oct 2016)

Investors like Suskin were by now in panic mode, trying to withdraw their funds to protect whatever was left. Their requests for withdrawal were met with a string of messages explaining technical and regulatory hurdles that had to be crossed before money could be released. To date, investors contacted by Moneyweb have yet to receive a cent. Nor will they, until the liquidation process is finalised.

Liquidation

Praesidium and its sister company Imagina FX were placed in liquidation in October 2020 after investors approached the court saying they were unable to make withdrawals.

The question the liquidators are now trying to answer is whether there is anything left for investors.

There were three companies bearing the name Imagina: Imagina FX, Imagina Asset Management, and Imagina International Trading, based in Mauritius.

Shocking discovery

Not long after the “black swan” letter was sent out to investors, Chad Thomas of IRS Forensic Investigators was asked by an overseas client to see what he could sniff out. What he found was shocking.

“Investors were asking for refunds and they were getting the usual runaround with these types of schemes. My advice was to stop waiting and to proceed against the company for liquidation.”

Facebook and social media were now aflame with accusations of fraud by the directors of the company, which accusations were denied.

Theo van den Heever of D&T Trust was appointed provisional liquidator of Praesidium, and Christian Bester of Mazars was handed the task of lead provisional liquidator for Imagina FX.

Van den Heever says a check into the Praesidium bank account showed only R100 000 available as at October 2020.

The Financial Sector Conduct Authority (FSCA) has opened a forensic investigation to find out what happened to the money under Praesidium control, which Van den Heever estimates at north of R1 billion. Others put it closer to R2 billion.

Criminal cases have since been opened against Praesidium and Imagina.

The Imagina FX provisional liquidators asked the Cape High Court for extended powers to track down company assets, and on October 27 last year was granted an Anton Piller order to search (without warning) the business and residences of directors of the company for information. The sheriff executed the Anton Piller order the following day and came away with a trove of documents and information.

Ponzi scheme denial

Shaun Pienaar of Enderstein van der Merwe, the attorney for Massyn, tells Moneyweb the Anton Piller order was unlawfully executed, and denies his client was involved in a Ponzi scheme – which is what several investors allege.

“The sheriff took everything, didn’t identify evidence, and then handed that evidence over to the attorneys for the liquidators – which they are not allowed to do,” he says. “The sheriff is supposed to hold information (secured by an Anton Piller order) until the court decides what must be done with it.”

Replies Imagina FX liquidator Christian Bester: “This accusation is vehemently denied by the liquidators and forms part of the dispute that will be decided by the High Court on the 9th February 2021.”

Massyn goes to court to challenge inquiry

Imagina FX was placed in final liquidation in November 2020. A Section 417 inquiry (in terms of the Companies Act) was convened on November 9 to question officers of the company in an attempt to find out what happened to investors’ funds.

Evidence from Carl Japhtes, a former director of Imagina FX, provided some clues as to what happened to the funds, but the picture remains murky.

It seems a substantial portion of funds was channelled into Octox, one of the companies allegedly controlled by Massyn.

Massyn, his wife and sister-in-law were due to give evidence to the 417 inquiry in November, but applied to the Cape High Court to set aside their subpoenas. When this was rejected by the high court, Massyn told the inquiry he was in the process of preparing an application to rescind the order convening the 417 inquiry. He is also challenging the legality of the Anton Piller order which resulted in the seizure of digital data and documents from his home and office.

While Massyn is taking his battle to the courts, his fellow director Andrew Cunningham-Moorat has provided authorities, including the police, with a statement.

The first meeting of creditors was held on December 18, 2020 when claims of R94.6 million were admitted, but the full amount of funds invested far exceeds this, according to those involved in the case.

One investigator, who asked not to be named, says he is aware of at least three clients who invested about R50 million each.

And it seems at least one investor placed more than R100 million into the scheme.

A clearer picture of the extent of the damage awaits the second creditors’ meeting, when more claims will accounted for.

“Mr Massyn has unfortunately frustrated the process by not assisting us with all the requested documentation and information with regard to the whereabouts of the funds and it would appear that the bulk of the investors’ funds have been misappropriated,” wrote Bester in a note to creditors on November 25 last year.

Pierre du Toit, an attorney at Mostert & Bosman which represents the liquidators of Imagina FX and Praesidium, told Moneyweb that Massyn had exclusive control over all of the funds entrusted to Imagina FX for investment.

“Massyn blatantly refuses to comply with his legal and moral duties to tell investors what he had done with their hard-earned funds. Instead, he utilises all available avenues of delaying tactics to prevent being questioned under oath,” says Du Toit.

“The question is not whether Massyn will have to testify, but only when.”

FSCA weighs in

In May 2020, the FSCA suspended the licence of Praesidium Advisory Services “due to information received indicating the possible misuse of its FSP [Financial Services Provider] licence.”

This was after receiving complaints from investors alleging that Praesidium Advisory may be operating an unapproved foreign collective investment scheme and soliciting investments from members of the public.

“The complainants are also concerned that Praesidium Advisory offers returns as high as 40% per annum,” reads the FSCA statement.

“The public’s attention is drawn to the fact that the Praesidium Global Fund and/or the Praesidium Mauritius Managed Fund, which is being offered by Praesidium Advisory to members of the public, has not been approved by the FSCA. Upon concluding its investigation, the FSCA will decide whether to withdraw the FSP licence or lift the suspension.”

The FSCA’s head of enforcement, Gerhard van Deventer, tells Moneyweb that a forensic investigation is still ongoing to ascertain how much money was involved and where it went.

“From our investigations so far there does not appear to be any evidence of substantial trading going on within Praesidium or Imagina FX,” he says.

“Money came in through various companies and then appears to have been co-mingled with funds in offshore accounts.”

The FSCA says it is awaiting information from the Mauritius Financial Services Commission and other foreign regulators to see who controlled the offshore accounts. Also being awaited are statements detailing the transactions executed on the accounts.

The forensic investigators are now attempting to unscramble the Praesidium/Imagina omelette to see if any funds remain to be returned to investors. This is likely to be a long and potentially disappointing process for investors.

Anyone with further information on the case can contract Captain Laas, working with Johannesburg Commercial Crimes Unit, at 084 782 2026.

Listen to Nompu Siziba’s interview with Nancy Bambo, head of market content at Momentum Securities  (or read the transcript here):

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COMMENTS   31

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This so-called investors in these schemes need to answer this simple question that I ask people who ask me if it is worth gambling in such schemes i.e. ‘get rich quick schemes in general’.

My question is: would you give a Sangoma R10 000 to tell you what the winning numbers for the R1 mil lottery is for this weekend, or even the next one?’

Now think about it, the Sangoma has no reason to refuse your hard earned ten thousand rands. Think further, and ask yourself, if this man or woman knew the secret or even winning numbers, or had such a portion to reveal such numbers; why would he or she give them to you? Is he or she that stupid? You think? Because if she or he knew these numbers, he or she would have placed them for herself or himself, rather than give them to you of all people!

Then there is our answer, you are the only fool in the room in this discussion, and a fool and his money are easily parted. So easy in fact, its easier than taking a candy from a baby.

You make a valid argument. I believe the reason people make these bad decisions are that they are blinded by their greed. They chase the rabbit down the hole and get stuck in the warren wondering how they found themselves there.

The other reason is that most people never think about their retirement until it is too late. They then realise that after 35 years of working, they only have say, R2m or R3m in their pension fund and that is not going to yield enough to live on. Hence they need to make the money grow very quickly and preferably double it. Desperation forces many errors. (PS I don’t sell retirement products, but I have seen this with my own eyes.)

Sangoma’s; your analogy is awesome considering too….the ANC is one big club of them

You beat me to it … 🙂

It’s hard to imagine how people who have accumulated such wealth legitimately can be so easily duped. To believe in consistently getting those returns one is obviously greedy but totally delusional. Either that is pocket money to them and they just feel annoyed at being swindled or they are totally stupid, hence my question how did they accumulate that amount of money in the first place. The perpetrators of the schemes must be punished but sorry I have little sympathy fir the victims,

The results depend on the incentives. Show me the incentives and I will be able to predict the results.

Regulated brokers are not allowed to charge more than 4% in commissions. Brokers of Ponzi-schemes earn 10% in commissions. The remuneration structure motivates “innovative” brokers to sidestep the regulated alternatives to channel funds from naive investors into Ponzi-schemes. The commission comes from the funds that are invested.

This implies that naive investors bribe unscrupulous/naive/ignorant brokers to invest their funds in Ponzi-schemes. This is a loop structure where the broker motivates the investor to bribe him to invest his money in a Ponzi-scheme. This process is kickstarted by the operator of the Ponzi-scheme when he promises high commissions to agents or brokers.

This process is very similar to the ANC government. It is the redistribution of property based on the promise of a better future. The ANC municipal councillors and parliamentarians are the brokers who earn exorbitant commissions to sell this scheme to ignorant citizens who will eventually lose everything.

Maybe not all the funds were not accumulated legally. Have you thought of that.

A fool and his money is soon parted.

Sorry but I don’t feel sorry for any of the investors. Let’s call a spade a spade. If you stupid you are stupid – that’s it!

just invest in the JSE or large asset manager funds if you don’t have the knowledge, you will seriously be better off than all these stories we are reading every other day ….

Always check where you’re funds are held offshore if it says Cyprus, Mauritius or any island run away. It should only be your destination if you want to go on vacation there. Due diligence seems to be the biggest problem, people try to get rich quick and never check if they are regulated by an approved Authority.

They only see dollar signs and greed clouds their judgment. Surely Sanlam, Old Mutual etc have products for long term returns but people would rather hand over their money to thieves.

It’s similar to the investors who lost everything in MTI

Strange that fact is sometimes stranger than fiction, Ciaran’s lap top is going to get burnt out soon writing so many articles of the like in the last few months. Why strange, hell another one and with Billions involved.

A constant discussion on the blogs especially by the regulars is the question of how knowing, thinking, functional people put money into these schemes. As per previous reasons such as stupidity, greed, lack of knowledge, trust and the worst is that the investors know what they are getting into but figure that can get in and early leaving later guys with the problem. However another thing that in my opinion is common is that these sales pitches fit exactly the “marks” expectations and once this “stoooorie” is set in place an outsider will not be able to change the marks mind at all.

What also seems to happen is that “investors” seem to talk when things are “swimmingly” and are dead quiet when not. An example of this is the MTI Global blogs, at first there was a lot of support and as the news got worse it faded away.

Isn’t international fiat currency key to arbitrage trading on cryptocurrency?

So forex firms add to the enormous risk of cryptocurrency?

It’s rather sad that this is the image that gets portrayed in the media (no fault of theirs) regarding the emergence of a new alternative asset class…

Derivative investing is becoming more accessible and can offer something of value to retail mom and pop investors…

How about looking to platforms like Dawinex and perhaps even some established local players with a credible track record and doing a feature on their success as opposed to always painting the new entrant in such a poor light?

Given, the market is full of cheats and fake providers, but surely there are those who are fair and able to deliver returns in excess of local managers?

A fool and his money are now being parted on a timescale of nano-seconds.

“One investor contacted by Moneyweb has $1.9 million (R28.9 million) at risk in the company. Another overseas-based investor sunk $900 000 (R13.7 million) into the fund”. …”and it seems at least one investor placed more than R100 million into the scheme”

What I don’t understand is where do people get the kind of money to put into these scams when you talk about R28 to R100 million? You do not accumulate that kind of money if you are stupid and if they are that greedy then they are too stupid to be self aware of their greed. Anyone with a lot of money surely knows that more money does not equate to a better or happier life. Obviously they do not understand how to live a happy, contented life of gratitude and in harmony. We need a psychologist to explain this.

Shows significant random luck is also involved with people and wealth..easy come easy go!!

Or otherwise they had a lot more to start off with … who know?

I read a lot of comments before making my own.

I think it would be nice to tell people how to identify these bad investment platforms than to call them names. I know mots of them do not listen but we should still try.

Another thing is to look at what is wrong with our regulatory system that we seem to always have these scandals, and I mean they are so close to one another. What is going on with the regulators? Is it the gap between innovation and regulation?

Constantly get ‘make money with forex’ ads on youtube.i just stay faaar away

I have to wonder how people that accumulated R50m to invest in this ever accumulated R50m in the first place!

Inherited? Lottery?

Probably they have a lot more to start off with.

Remember Scott Asset Managers run by one Keith Scott, a paraplegic? He smooth talked over R330 million from his brainwashed flock – all helped that he actually traded and was pretty good at it until it became easier to steal.

Back in the late 1190’s he took in many people, PACT (some R30 million) and even a Russian mobster who got hold of the Zulu mafia to bump Scott off. They failed miserably and nothing happened to Scott like nothig will happen to this crowd.

FSCA is a toothless buldog.

Aha….yet another fiat FX scam…one of millions over the many decades…

But had this been a Bitcoin ‘scam, Buys and all these other fiat fanboys would as usual be pooh pooing about how ‘dodgy’BTC is blah blah

Boy, you gotta love the irony !

Reality : I have only ever invested in assets. That they happen to be measured in a currency is irrelevant to me but usefully since if I sell I need to know how many potatoes I can buy with the proceeds. I can’t trade a 100th share of one Apple for a bucket of potatoes.

These scheme’s are easy to identify, yet people get duped. There’s one golden rule. If superior returns are promised, then you know you are dealing with a bogus investment. No legitimate scheme can consistently exceed average/normalised returns by huge margins.

Ok, yet another fiat robbery, one of millions over the history of money since the Fed began its printing scam

Yet, had this article been about BTC, all those haters would be climbing in now…

So where are those crypto haters ‘Johan Buys’, ‘The Spark’ etc etc now ????

Strangely silent…oh the irony !!

Actually the whole world is one giant Ponzi scheme. Governments print money with no intention of ever paying it back, meanwhile they skim it off the bottom with devaluation and off the top with inflation and if you still manage to show a profit they steal a big percentage with capital gains tax.

While there are a few widows and orphans assistance programs, generally the money that is paid in tithes and donations to religious organisations also bears no return. They preach about “planting a seed” and “partnering with us” and “love gifts” and preach it is more blessed to give than to receive but look at the real estate holdings of these organisations! Who is doing the blessed giving apart from you?

Exactly- one of my prize beefs against the SPCA constantly pleading poverty. Every year drones of wealthy, single old people die leaving their entire real estate holdings to the SPCA in memoria Fifi the poodle euthanased and rip circa Feb 2016.

Instead of liquidating the property to free up some cash, the organisation has a policy of NOT liquidating any fixed properties ever. Much easier and highly profitable to continuously take from Joe Public.

And not a moment too soon!

End of comments.

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