Alleged Ponzi shows defiance

A company that had its financial services provider (FSP) licence withdrawn last year by the Financial Services Board (FSB) after the regulator found evidence that it was running a Ponzi scheme has told Moneyweb that it is still operating. Profit Trading, which markets a ‘forex robot’ that supposedly trades the currency markets on behalf of investors, is still looking for new clients.

In correspondence with Moneyweb and City Press, the company’ founder Myles Ndlovu has said that Profit Trading does not need a licence as it is a fintech company that only provides a technology service, and this is not an activity governed by the Financial Advisory and Intermediary Services (FAIS) Act. He also indicated that he is appealing the regulator’s decision to withdraw the company’s licence.

The FSB Appeals Board however confirmed to Moneyweb that it has not received any notice of appeal.

Forex robot

Profit Trading was launched and licensed, as DMD Capital, in 2014. According to the company website, it offers a web-based application that automates trades on foreign exchange markets around the world. This it calls a ‘forex robot’.

This technology supposedly has a high trading success rate that assures investors of returns. Moneyweb has seen a Profit Trading contract which states:

“Our Forex Robot targets average benchmark of 5% profits on all accounts per month. That is the performance record we aim to uphold and improve when ever possible.”

A compounded monthly growth rate of 5% is just under 80% per year.

Publicity

Profit Trading was so successful in marketing its product that Ndlovu secured a number of television interviews, including on SABC’s Morning Live, SABC’s Expresso, and Business Day TV’s SME Zone. In all of these he made a point of emphasising the fact that his company was a licensed financial services provider.

However, Profit Trading was never licensed to trade forex. The FSB only ever authorised the company to give advice and render intermediary services on a category 1 licence relating to derivative instruments.

This caught the FSB’s attention during the course of 2015, and further enquiries by the regulator raised concerns that something more may be going on. In September 2015 the regulator instructed its inspectors to conduct a formal investigation.

This led to the suspension of Profit Trading’s licence in February 2016, and finally the full withdrawal of the licence and Ndlovu’s debarment in September last year. The FSB also passed the matter on to the commercial crimes unit for potential criminal prosecution as it believes that Profit Trading was running a Ponzi scheme.

Investors

At the time that the FSB was taking action, clients were also starting to raise concerns. A number of other clients and former employees who put money into Profit Trading have told Moneyweb and City Press that they were initially able to withdraw any profits after 21 days. However, around September 2016 they started experiencing problems with accessing their money.

Initially these were explained as delays in the system or problems at the banks. However, months have now passed and they allege that no money has ever been released.

Two former senior employees at Profit Trading have indicated that R107 million is supposedly in client portfolios at the company. One told Moneyweb that a total of R52 million was actually invested. The remainder was the supposed growth on that capital.

Still operating

Ndlovu declined to comment on these figures and remained defiant about the company’s operations. He insisted that Profit Trading is still able to make payments and that clients will get their money.

He also brushed off the allegations made by former employees, arguing that they were “rebellious”.

“We believe you are being used by our bitter ex-employees who have opened their own companies by trying to steal our clients and business model,” he said. “There are no specifics here, it’s all hidden because the sources are our ex-staff members who go around speculating malicious articles on WhatsApp even to our clients.”

When Moneyweb requested further answers as to where the client money was and why they had not been paid out, he replied:

“We have legal representation try and slander and deal with the legal repudiations you will think black an inferior, you will realize what is at stake if you want to publish lies you will enjoy the outcome, try us! Work on facts not on making black people look bad, get professional don’t thrive on damaging black reputation in order to buy yourself a good name.” (sic)

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