Metals investment was a steal
Offered 23% growth R500m fraud alleged
BASKETS of earth metals supposedly stashed somewhere in Dubai with growth interests of up to 23% sounded too good to be true for many investors.
Now, the authorities are investigating Global Electio Investments, a rare metals investment company, which they believe defrauded hundreds of unsuspecting clients countrywide of up to half-a-billion rand.
This week, it was revealed that a joint probe between the Hawks and private fir m IRS Forensic Investigations has entered a critical stage, with more than 30 former clients of the firm launching fraud and racketeering charges against Electio, its directors and employees.
For years, the company used boiler-room style tactics, calling up potential investors across South Africa to aggressively sell “baskets” of earth metals that would be stored in Dubai as their value increased.
A former employee of the company, who has now turned whistle-blower, spoke to the Saturday Star this week and laid bare details of how the alleged fraud scheme worked. At first, the company would use those who signed up on its website as its initial client base, offering them the opportunity to buy baskets of metals that would increase in value at a promised rate of 21% to 23%.
The most basic package, the defence basket, which held materials used in military vehicles and cars, sold for R43 000.
The green energy basket, holding metals used in solar panels and other earth-friendly products, went for about R50 000. The future tech basket, which supposedly held metals used in PlayStations and home appliances, went for almost R100 000 and the smartphone basket went for R500 000.
The whistle-blower said the aggressive sales tactics used meant he was signing up between five to 10 clients a month, though the company had set “ridiculous” targets, including 300 calls and hours of talking time a day. Clients were promised that the company would facilitate buying and selling of the baskets depending on when payouts were required, and even provided certificates of authentication that the whistle-blower believed were real.
The operation began relying on referrals from clients, but eventually it began a cold-calling campaign to ensure it could maintain its momentum.
In 2015, the whistle-blower began seeing angry clients coming to the company’s Melrose Arch offices, demanding their money back. The company claimed a lack of liquidity, and ultimately was unable to satisfy them. In the middle of last year, the company sent a cessation notice to its client database, saying the baskets were being kept in a bonded warehouse in Dubai, under the custodianship of the Bermuda Commercial Bank. “We hereby confirm (the company) is unable to undertake any further dealings and, as such, this letter constitutes (Electio’s) written cessation notice to you…” the e-mail read.
The company’s offices appeared to have closed shortly afterwards. However, long before the cessation notice, numerous clients of the firm had approached IRS with their complaints, prompting the beginning of a now 18-month investigation into the company.
IRS chief forensic investigator Chad Thomas revealed that 32 separate complainants had come forward, and he had interviewed numerous former employees at the company.
“The Specialised Commercial Crimes component of the DPCI (Directorate for Priority Crime Investigation) is taking this case extremely seriously and is at an advanced stage in their investigation. Several high-level strategy meetings regarding this case have taken place,” said Thomas.
He said he hoped there would be financial restitution for Electio’s aggrieved clients.
“The suspects used a local bank as a ‘clearing house’ for funds which then landed up in a bank in the Caribbean. At present all local and foreign assets and bank accounts are being traced in an
Local and foreign assets and bank accounts are being traced in an effort to afford some financial restitution to the victims of this alleged fraud
effort to afford some financial restitution for the victims,” he said.
Hawks spokesperson Hangwani Mulaudzi confirmed the probe but wouldn’t be drawn on details of the alleged scam. “At this sensitive stage we want to reserve our rights not to discuss the case in a public platform to allow the investigation to proceed without any hindrance from outside forces,” he said.
BDK Attorneys’ Piet du Plessis initially represented the company as a whole during a failed liquidation application last year, but now represents three senior staff members, former director Jalil Motazedi, sales representative Shaunita Singh and manager Colleen Langeveld.
Du Plessis said while his clients did not have direct proof of the theft and fraud, he recommended they give their information of the company’s dealings to the Hawks. While this would also effectively make the trio whistle-blowers as well, it’s unclear if it meant only the company’s foreign directors would be charged with fraud.