Durban - It’s going to be a bleak Christmas for hundreds of Durban investors who poured money into Carmol Distributors, an alleged ponzi scheme now under investigation by the South African Reserve Bank.
Almost 2 500 investors, many of whom were encouraged to join by their local pastors, received a letter this week telling them the company’s operations had been suspended following a court order.
The alleged scheme, thought to be worth over R450 million, involved the distribution of diesel to foreign countries. Investors were promised up to an 8 percent monthly return on their investment.
The company, owned by Joburg-based entrepreneur Yunus Moolla, was suspended this week pending an investigation in terms of the Banks Act.
A Chatsworth-based agent, Selvan Pillay, said he had been both an agent and an investor for two years.
“I am worried. This seemed like a great investment scheme and we believed this was a good option because Moolla came across as an honest man. We always had doubts about the company, but investors were seeing their returns so they were very happy,” said Pillay.
He is now concerned that pending the investigation, he will not get his returns and is also afraid that he may lose the lump sum he invested.
“At the beginning of this month, investors were waiting for their returns and when they didn’t come, we knew something was wrong. This week we received the letter,” said Pillay.
He said he was aware that the company targeted churches.
An Isipingo pastor, who did not want to be named, said Carmol Distributors had targeted various churches in his area. An agent had approached his church, but he was suspicious.
“I know of churches that encouraged worshippers to invest large amounts of money. I have friends and family members who have taken out loans and invested their retirement packages into this scheme. I fear what will happen to their money.”
Another investor, Selva Pather, said his family had invested R300 000.
“I am concerned. What if we don’t get our money back? I had no idea this could have been a Ponzi scheme. I have friends who have invested millions in this scheme,” he said.
In a letter issued by Moolla’s attorney, Ayoob Kaka, investors were told they would not be paid their returns until the investigation was complete.
“All investors are requested not to make any further payments in respect of continuing investments, nor can Carmol entertain any new investors until the matter is resolved. Investors’ returns have also been suspended,” the letter reads.
Kaka told the Sunday Tribune that the audit company Ernst & Young had been appointed to investigate, and that a dedicated helpline had been set up to address investors’ queries. The number is 011 772 3000.
“I issued a second letter to investors this week, telling them they should direct their queries to the helpline and not to my offices. The investigators are compiling a list of investors and the value of their investments,” said Kaka.
Asked if there was a possibility that investors could lose their money, he said he was uncertain of what the outcome of the investigation could be and that there were no guarantees.
Moolla hosted regular seminars at the Coastlands Hotel to attract investors and there were agents acting on his behalf in uMhlanga, Chatsworth and Isipingo.
For every referral, an agent is paid an incentive of R1 800 on a R100 000 investment.
Two months ago, the Sunday Tribune reported that Ballito businessman Prinasen Dhaver, 29, had been arrested and charged with contravening the Banks Act for allegedly running a Ponzi scheme.
He alleged that his company, Innovatech International Solutions, distributed petroleum products to African countries and the UAE. Investigators are looking into possible links between Carmol Distributors and Dhaver’s company.
How the scheme works
According to the contract by Carmol, investments relate to the sale and storage of diesel products. Investors sign a minimum 12-month contract and invest a minimum of R100 000.
The contract lists Moolla as the representative for Carmol Distributors. It states the return is on average a minimum of 6 percent to 8 percent monthly, which is equivalent to 72 percent to 96 percent a year.
Why this is improbable
Economist David Shapiro of Sasfin said that Carmol Distributors’ operations sounded “suspicious”.
“When the returns are that high, you have to question the legitimacy of the scheme. The SARB is investigating the company because if you are acting as a bank and taking deposits from people, then you would have to comply with the Banks Act,” he said.
Shapiro said this was just another example of how gullible and uneducated people were when it came to financial products.
“There is a very high possibility that investors may not see their money again. A Ponzi scheme is basically taking from one person to pay the other, and this sounds very much like one. One would have to question the high return rate as well as the legitimacy of the company’s operations,” he said.
Shapiro added that, according to the Consumer Protection Act (CPA), an investment that offered interest rates of 20 percent and above the SARB regulated repo rate (which is 5.75 percent) was a Ponzi scheme and people need to be wary. They should not promote or join them.
- Sunday Tribune