Durban - The registrar of banks will, on Thursday morning, pull the legal plug on what is alleged to be an illegal “investment scheme” into which thousands of people – many from working-class neighbourhoods around Durban – have ploughed more than R1 billion.
At this stage the company, Carmol Distributors, appears to still have assets worth R200 million, including about R130 million in a frozen bank account, but reports say its debts exceed this by more than R385 million.
And unless other assets are found, backers can expect to get back little of their money, which they invested with the lure of high returns from petroleum trading.
The registrar is seeking an order from the Johannesburg High Court this morning placing the company in liquidation.
It also intends, in the near future, to apply for the sequestration of the estates of its registered owner, Fathima Carawan, and her husband, “managing director” Yunus Goolam Hoosen Moolla.
Complaints have been lodged with the SAPS for investigation, but both are believed to be living in Dubai and could not be reached for comment.
On Monday, Moolla also failed to appear in the Durban Regional Court in an unrelated fraud matter and the matter has been adjourned until later this year.
It is alleged that Moolla used agents, word of mouth, presentations and web-based advertisements to lure investors, claiming the business was involved in selling petroleum and diesel products, offering them high returns on their money – as much as 72% to 96% annually. But now the investors have been left high and dry.
Attorney David Randles, who represents about 300 investors, said that at a recent meeting of investors in a school hall everyone was asked to donate R5 to pay for the hire of the venue. “It was apparent that most had now fallen on very hard times. There was a small pile of cash and coins collected.
“It is very, very, sad,” he said. “They are modest people from Phoenix and Chatsworth. And they were taken advantage of.
“It seems Moolla clearly found a market amongst the poorer people through churches and gullible groups of friends.
“He paid healthy commissions to agents – as much as R60 000 over a year for bringing in R340 000 – and they were let loose on the communities.
“As these things happen, word spreads and some people started getting paid back for their ‘investments’. About R420 million was paid back, but then the well dried up.”
Randles said most investors were too embarrassed to talk about it because they admitted to being “greedy”.
“At this stage, because the investigations are being done by the Reserve Bank, all reports are confidential, so investors don’t really know what is going on. But once a liquidator is appointed we will know more.”
The head of the investors’ committee – who asked not to be named – said people had dug into their bonds and pensions and had taken loans to invest. Now they risked losing their homes and cars.
“It has been devastating. Moolla has left us in the lurch while he is living in luxury overseas.”
In her affidavit in the winding up application, Registrar Rene van Wyk says investigations proved the couple had “illegally conducted the business of a bank”.
When they were called upon to return all money paid to them by investors, they failed to do so, leading to the conclusion that the company was insolvent.
She said alarm bells first went off in November 2013 when Carmol’s bankers, Standard Bank, observed “suspicious transactions” on its bank account.
Following preliminary investigations, Carawan and Moolla were asked to provide details of their business in writing, but in spite of various undertakings, this was never done.
Ernst and Young Advisory Services were appointed as “inspectors” to further investigate the situation, and in February this year it was confirmed Carmol Distributors was involved in an “illegal deposit-taking scheme”.
After the repayment directive had been issued, KPMG were appointed as “repayment administrators” and in terms of a court order, certain assets including cash and gold coins found at the premises, were seized and bank accountants were frozen.
“The company does not carry on a business and is unable to generate any profit to cover its asset shortfall,” Van Wyk said. “In any event, it cannot trade because it is illegal.”
The attorney acting for the registrar, Widaad Ebrahim, said a notice of opposition had been received on Wednesday and the company was expected to apply for an adjournment.
Echkard Volker, managing director of Integrated Forensic Accounting Services, said people had to think long and hard before putting their money into a get-rich-quick-scheme that was too good to be true.
He said the promise of high returns was enough proof that something was not adding up with the ‘investment’ scheme. Such schemes relied on recruitment.
‘If these were such an excellent opportunity, why would the principal be willing to share it with strangers, as opposed to becoming extremely wealthy himself?’
The Mercury