Investment manager

Regulator fines investment manager R20m for running ‘Ponzi-like’ scheme

The FSCA says Praesidium Advisory Services did not have a license to exchange currencies for its clients.

  • SA’s financial services watchdog has fined Praesidium advisory services director Craig Massyn R20 million and banned him from industry for two decades.
  • The regulator found Massyn’s forex investments to be ‘similar’ to a Ponzi scheme.
  • The FSCA has asked the police to investigate Massyn and his two co-directors for fraud and theft.
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The South African financial regulator has fined the directors of the Praesidium group of companies several million rand and barred them from the financial services industry for offering investments “of a nature similar to a Ponzi scheme”.

The Financial Sector Conduct Authority (FSCA) announced on Monday that its investigation into Praesidium Advisory Services, Praesidium Wealth and Praesidium Sentinel found that the companies had breached numerous financial sector laws. All three have already been liquidated.

In addition to the fines and exclusions announced on Monday, the FSCA said it would take action to the police because it “appears likely that several offenses have been committed, including fraud and theft.”

No license, constant losses

The FCSA investigation, which has been ongoing since September 2020, focused primarily on foreign exchange trading carried out by Praesidium Advisory Services.

He found that the group was trading currencies on behalf of clients without having a license. He also lacked the proper license to receive client funds to invest in foreign exchange instruments.

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Praesidium Advisory Services paid out the funds received to two companies called Octox and Imagina FX, which were not licensed financial service providers. Both companies were linked to the director of the Praesidium, Craig Massyn.

According to the FSCA, Massyn “monitored” clients’ bank accounts through Octox and traded their funds through the Imagina FX trading platform.

But Massyn was unsuccessful as a trader and constantly suffered losses. Instead of paying clients from forex profits as it claimed to do, the FSCA found that Massyn was paying them from the money they had invested:

It would therefore seem that Massyn was operating a scheme of a nature similar to a Ponzi scheme… [The] the positive trading returns reported by Massyn could not be remotely possible.

Massyn was fined R20 million and barred from the financial services industry for 20 years.

Its two co-directors, Andrew Cunningham-Moorat and Brett Bukes, were fined R2.5 million and R6.5 million respectively. Both were banned for 10 years.

The lesser penalties against Cunningham-Moorat and Bukes appear to be related to the fact that only Massyn negotiated on behalf of clients.

“Once customer funds were released to Octox and Imagina, Cunningham-Moorat and Bukes lost all control and oversight over customer funds,” the FSCA said.

“Massyn controlled and had access to client funds in Octox bank accounts and on the trading platform. Massyn conducted all transactions.”

Two Praesidium employees, Cindy Lee Schuster and Ryan van Niekerk, were both fined R300,000 and given a five-year ban.