Saturday, February 22, 2014
Hawks are not investigating R800m Defencex Ponzi
A year later no complaint has been laid by the Reserve Bank.
JOHANNESBURG – The Hawks have confirmed that they are not investigating the Net Income Solutions Ponzi scheme, more commonly known as Defencex. This comes a year after the scheme’s bank account was frozen by the Western Cape High Court.
Defencex was one of SA’s largest Ponzi schemes in recent years. Court documents show that it solicited more than R800m from nearly 200 000 investors. When its bank account was frozen it had a balance of R320m.
On February 5 last year the Reserve Bank appointed inspectors from audit firm PWC to inspect the business affairs of Defencex, Cycle4Dollars, Net Income Solutions, and its director Chris Walker.
The inspectors, Louis Strydom and Malcolm Campbell, were asked to determine whether Defencex and Walker were contravening the Banks Act.
Based on the inspector’s preliminary findings, Deputy Registrar of Banks Michael Blackbeard submitted an affidavit to the court asking it to freeze Net Income Solutions’ account held at Standard Bank. Blackbeard was concerned that Defencex was accepting deposits in breach of the Banks Act. His concerns were validated by Judge James Yekiso, who described Defencex as an “illegal deposit-taking scheme” in his judgment finalising the freezing order.
Despite the Registrar’s concerns, as well as judge Yekiso’s damning judgment, it appears that the Reserve Bank has not yet laid a complaint against Defencex with the Hawks.
Moneyweb asked national spokesperson Captain Paul Ramaloko whether the Hawks were investigating Defencex/Net Income Solutions. He replied: “At this stage the Hawks is not investigating the matter of Net Income Solutions. The Reserve Bank has not lodged a complaint with the Hawks.”
Ramaloko confirms that the Reserve Bank had similarly laid no complaint with the various commercial crimes divisions of the South African Police Service.
The Reserve Bank has only ever issued one media release relating to Defencex. That was on 17 June last year. It read as follows:
“The South African Reserve Bank (SARB) welcomes the judgment passed in the Western Cape High Court, regarding the Net Income Solutions scheme.
“In terms of the provisions of the Banks Act any person suspected of taking deposits from members of the general public may be investigated by inspectors appointed by the SARB. Furthermore, in terms of the provisions of the Banks Act any person taking deposits from the general public in contravention of the Banks Act may be guilty of an offence and may be prosecuted.
“Criminal offences are reported to and investigated by the South African Police Service (“SAPS”) and perpetrators are prosecuted by the National Prosecuting Authority (“NPA”) in a competent court of law. The Office of the Registrar of Banks has no powers to perform such functions and merely assists the above-mentioned authorities if and when requested.”
Since it issued the media release, the Reserve Bank has maintained a steadfast silence on the Defencex matter, not responding to Moneyweb’s repeated requests for comment. It is unclear whether PWC has concluded its investigation into Defencex or filed a report.