Reserve Bank launches campaign over Ponzi schemes
THE Reserve Bank yesterday raised the stakes in the battle against the scourge of pyramid schemes with the launch of a national campaign aimed at helping 11-million people countrywide to spot the red flags before they are fleeced.
The campaign, “Don’t say byebye to your money,” comes after the architect of one of SA’s worst pension scandals, Peter Ghavalas, completed his testimony last week in the trial of another pension-fraud accused, Cadac executive chairman Simon Nash.
It follows hot on the heels of the Reserve Bank’s own court case in the near R1bn Defencex pyramid scandal, which promised returns of 2% a day; and the sentencing of former Fidentia boss J Arthur Brown.
The central bank’s worry is that nonregistered schemes and companies keep taking people’s money — yet, in terms of banking legislation, only banks, collective investment schemes and brokers, through brokerage accounts, can take deposits.
Online investment company Defencex ran foul of the registrar of banks earlier in the year after it was alleged that while R800m came in, this was not reinvested. An order of court placed the accounts under control of the central bank until the investigation is concluded.
The bank said yesterday that in pyramid and Ponzi schemes, “for everyone who makes money, others will inevitably lose their money”.
“It’s an old cliché, but it rings true: if it sounds too good to be true, it probably is,” said Reserve Bank head of group strategy and communications Hlengani Mathebula.
The campaign is “about having an informed public as a first line of defence. If the public keeps giving these institutions money, we are in trouble”.
The bank said “such schemes absorb the savings of the population, which would otherwise be invested in the country’s financial system”.
The campaign will be publicised on radio stations in all 11 official languages over the next four weeks. The central bank will also be partnering with the Financial Services Board (FSB), the South African Police Service and commercial banks to spread the message.
Financial Services Board head of the directorate of market abuse, Solly Keetse, said the Financial Services Board was charged with regulating the nonbanking financial services sector and has different regulators to consider different areas, such as pensions, securities services and financial advice. The directorate currently has 21 open cases, while a total of 327 cases have been investigated since 1999.
The Nash trial is in recess, pending a trial within a trial next month on whether meetings and information obtained are covered by the Inspection of Financial Institutions Act’s secrecy provisions; and follows an earlier trial within a trial on whether the state obtained documentation from the FSB illegally.
The fraud trial is expected to only begin again early next year when the state calls its next witnesses.
Efforts to extradite SA’s Ponzi R12bn kingpin, Barry Tannenbaum, continue. A house in Camps Bay linked to the scheme was attached this year, while the investigation into the full extent of the fraud persists.
In another high-profile case, the liquidation inquiry into former Liberty franchise SFS Financial Services, which has been accused of running a Ponzi scheme by plaintiffs, is considering whether any potential criminal offences or irregularities need to be referred to the director of public prosecutions.