A Pretoria diamond mining investment company is facing an extensive forensic audit after liquidators uncovered potential investor fraud allegedly amounting to tens of millions of rand.
Forensic auditors, tasked by the Banking Registrar along with liquidators, on Thursday sifted through reams of documents and files at the Irene office of Mayfair Mining.
Their investigation into the company comes as the department of trade and industry awaits directions from the minister on steps to be taken against the firm, which is being accused of recklessly trading with the funds of 135 investors from South Africa, Australia, Russia, UK and Germany, some of them pensioners.
A pensioner died of a heart attack recently, apparently shortly after learning that he had lost his life savings.
The firm’s directors, whose business was liquidated after an application by an investor in the Pretoria High Court in July, are alleged to have convinced investors to invest millions of rand in their business venture.
The venture, according to company documents, states that the company, which has been trading since 2000, is in the process of increasing its asset base for future diamond mining, prospecting and the selling of cut diamonds in both South Africa and Europe.
The project would, according to liquidator, Paula van Eeden, see investors providing money to the company to buy mine debris or sections of mines which they would then prospect. The company would then use a process known as “scraping” in the mining industry to search for diamonds which had escaped detection by mining companies.
Van Eeden said that while numerous mines approached by the company had approved the venture, the company’s directors, who include father and son Adolf and Francois Ellis, and Colin Stein, did not sign any deals with the mines they had approached.
She said the potential fraud was uncovered when the company’s accountant, Francois Coetzee, alerted the Department of Trade and Industry to potential criminal activity taking place at the business.
“Shortly after compiling a report in 2009, which is currently before the department’s minister awaiting recommendations, the accountant resigned from the business,” she said.
Van Eeden said Mayfair Mining had allegedly claimed to invest potential investors’ moneys in its various mining ventures in South Africa and Southern African countries.
“But, from financial documents which we seized at their offices, there were never any so-called investment deals signed with any mines which the company’s directors claimed to have approached.
“Other company documents show that while the company began trading in 2000, it had not earned an income between then and now.
“We have established that the company’s directors, who accumulated R20 million in investor funds between 2005 and 2011, allegedly lived personally off their investors’ monies,” she said, adding that the South African investors were from across the country, including Gauteng, Western Cape, Free State and KwaZulu-Natal.
Van Eeden said information in their possession indicated that the company’s owners had used several investors as agents to draw other potential investors into their venture.
“In return for this, the ‘agents’ would allegedly receive commissions and add-on bonuses for all the investors they had drawn into the scheme.
“We are currently conducting an audit with a team of forensic auditors tasked by the Banking Registrar and estimate that the company’s liability, along with interest earned, is more than R40 million.
“We, however, expect this amount to grow considerably as we uncover more investors,” she said, adding that the team would also look into whether the company was trading as a financial institute, which would be in contravention of the Financial Services Act.
“Based on the number of investors and the amount of money the company received, the firm should have registered its business with the Banking Registrar,” she said.
Van Eeden said they were waiting for the audit to be completed before they decided on what criminal charges to lay.
Van Eeden urged people who had invested with Mayfair Mining to contact her at Liquidators On Call on 011 823 5147 or at 87A Rietfontein Road, Boksburg West, Ekurhuleni.
Both Stein and Ellis declined to comment. - Pretoria News