The Hawks are investigating allegations that Sharemax Investments committed fraud and probing whether it operated a pyramid or Ponzi scheme.
About 40 000 people invested a total of some R4.5 billion in the various schemes promoted and marketed by Sharemax, which if proven to be illegal and a pyramid scheme, will make it the largest case of fraud in South Africa’s history.
A pyramid or Ponzi scheme is typically where investments by new investors are used to pay the interest and returns of older investors.
Hawks spokesman McIntosh Polela confirmed that the investigations by the elite crime-fighting unit were under way.
Attempts to obtain comment from Dominique Haese, who was financial director of Sharemax Investments and is now managing and financial director of Frontier Asset Management, which manages Sharemax’s property portfolio, were unsuccessful.
Polela said Hawks detectives were still gathering information and stressed the investigation was in its early stages.
Noluntu Bam, the Financial Advisory and Intermediary Services (Fais) Ombud, in a determination released yesterday, alluded to The Villa, the partially completed R3.5bn retail development near Pretoria that was promoted and marketed to investors by Sharemax, being a pyramid or Ponzi scheme.
“Given that The Villa had no income whatsoever other than investors’ money, the inescapable conclusion is that no matter how it was packaged, rental income was ultimately paid out of investors’ capital.”
Bam added The Villa was funded through a single unlisted company that was “not subject to the stringent regulatory requirements of the JSE”, did not have any track record, was “devoid of any meaningful assets”, and the method of appointment of directors itself should have raised questions about corporate governance and investor protection.
She ordered financial advisor Marthinus David Ras and/or Perfecsure Lewens Makelaars in Pretoria to repay Western Cape pensioner Iona Cowan the R800 000 she had invested in The Villa.
The registrar of banks investigated Sharemax’s funding model and decided in 2010 that it contravened the Banks Act. It only reported this contravention to the Hawks in March.
The comments by the Fais Ombud and confirmation by the Hawks that it was investigating criminal acts allegedly perpetrated by Sharemax, has cast a huge shadow over the legality of the scheme of arrangement and offer of compromise to shareholders and investors in Sharemax, that was sanctioned by the North Gauteng High Court in January.
The registrar of banks tacitly consented to the scheme of arrangement because Sharemax was under its statutory management when the scheme of arrangement was presented to court for sanctioning.
The registrar of banks appointed statutory managers to manage the repayment of funds illegally obtained from the investors in Sharemax’s various schemes in September 2010 when Sharemax defaulted on payments to investors at the end of August 2010.
Sharemax defaulted when the registrar’s decision that its funding model contravened the Banks Act became public knowledge, resulting in new investments into its schemes drying up. page 16