INVESTIGATIONS by the Office of the Ombud for Financial Services Providers (Fais Ombud) into the activities of Sharemax Investments found that investors’ money was used to buy “empty firms with no value” from Sharemax.
Fais Ombud Noluntu Bam said on Friday that it had also found that the promoters and the directors of the many companies involved in the group as well as the administrators were “substantially the same people”.
Investors were also “duped” into believing the Public Property Syndication Association would provide protection and money raised from investors through public companies was loaned to private entities without any due diligence on the firms and their ability to repay the loans, it said.
Business Report earlier this month reported that the Hawks were investigating allegations of fraud committed by Sharemax and whether the company was operating a pyramid or Ponzi scheme. About 40 000 investors had financed about 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 fraud in South African history.
Bam made the Sharemax comments at the launch of the Fais Ombud’s annual report on Friday when referring to a determination by her office to a complaint lodged by 70-year-old pensioner Elise Barnes against D Risk Financial Consultants and Deeb Risk.
Barnes invested R1.4 million in Zambezi Retail Park and R400 000 in The Villa on the basis of advice given by Risk, who was ordered by the Fais Ombud to pay Barnes R800 000 in respect of the Zambezi Retail Park investment, the maximum amount for which the Fais Ombud can issue determinations, and the full R400 000 for her investment in The Villa.
Bam said Barnes and several other investors were still waiting for their capital to be repaid.
After a High Court review application instituted by Risk was dismissed with costs, they had heard he had since lodged an appeal with the board of appeal of the Financial Services Board.
There was a substantial rise in the number of new complaints lodged with the Fais Ombud, and that fell within the office’s jurisdiction to 7 944 from 8 821 in the previous year, Bam said, adding that the amount of money it had put back in the hands of consumers increased by 26.8 percent to R44.1m from R34.7m in the previous year.
The past financial year had confirmed fears of “a rise in the number of consumers who put their hard-earned savings into black holes on the basis of lamentably bad advice wrapped in fancy presentations and accompanied by marketing material devoid of any fact, which could enable consumers to make informed decisions”.
She referred to criticism of her office, particularly for rewriting complaints and for not allowing live testimony of witnesses and cross examination of witnesses.
Bam said the courts had ruled that there was nothing unconstitutional or impermissible with the inquisitorial approach adopted by the Fais Ombud.