Regulator finds widespread misappropriation of client funds, false promises and deliberate misconduct by directors.
The Financial Sector Conduct Authority (FSCA) has fined Banxso’s directors and key individuals a combined R2 billion and reported the matter to the South African Police Service (SAPS) for criminal investigation.
The regulator says it will also provide the SAPS with all evidence collected during its multi-year probe into the trading platform and its key individuals.
The FSCA stated that the regulatory action followed an extensive investigation, which “found that Banxso and its key persons, inter alia, misappropriated client funds, provided false and/or misleading information to clients and to the FSCA, promised clients unrealistic returns and failed to act in the best interests of its clients”.
The R2 billion administrative penalties were imposed on Banxso and its directors, Harel Sekler and Warwick Sneider. (Sneider resigned soon after the first negative articles were published.)
The FSCA has also imposed a R20 million fine on the Banxso CEO at the time, Manuel de Andrade.
A R10 million fine has been imposed on Mohammed Bux, and a R5 million fine on Henry James Simpson, both former key individuals.
The FSCA also debarred Sekler, Sneider, De Andrade, and Bux for 30 years each, while Simpson has been debarred for 10 years.
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Banxso began operations in 2022 as a contracts-for-difference (CFD) platform. It was licensed with the FSCA and sponsored Bafana Bafana and UFC superstar Dricus du Plessis to show legitimacy.
However, a lengthy Moneyweb investigation found that Banxso sourced clients through fake and fraudulent social media ads, with prominent figures such as Johann Rupert, Patrice Motsepe, and Elon Musk supposedly promoting automated AI trading platforms that could generate monthly returns of more than R300 000 on a once-off investment of around R4 700.
At the time, Banxso denied any wrongdoing and claimed it had been hacked by a third party, with the leads illegally inserted into its IT system.
Over the course of the investigation, more than 380 people contacted Moneyweb, claiming they had lost a combined R280 million. Virtually all of them claimed they were duped by the fake advertising.
Moneyweb also reported that Banxso launched a second platform, AfriMarkets, which continued to trade under the same modus operandi as Banxso when the first negative articles about Banxso were published.
Banxso has revealed in court papers that it had around 7,000 customers, suggesting the losses could run into the hundreds of millions of rands, if not billions.
The FSCA also announced yesterday that it withdrew AfriMarkets’ FSCA license. Sekler also owned AfriMarkets, and it operated from the same office in Cape Town.
The licence had been provisionally withdrawn on 4 July this year. The FSCA said in a statement that its investigation revealed that AfriMarkets misappropriated client funds, provided clients with advice without a relevant license, provided false and misleading information to clients and to the FSCA, promised clients unrealistic returns, and failed to act in the best interests of its clients.
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UMarketPro and Protea Markets
Moneyweb also revealed that two new CFD trading platforms – Protea Markets and UMarketPro – have entered the space previously occupied by Banxso and AfriMarkets. The Moneyweb investigation revealed that these platforms operate with a virtually identical business model and that the overwhelming majority of Mixirite employees previously worked for Banxso and/or AfriMarkets.
The FSCA has also confirmed that it is investigating Protea Markets and UMarketPro.
ALSO READ: FSCA withdraws financial services provider licences of Banxso and Afrimarkets
“Unlawful conduct”
The FSCA stated in its press release that “in arriving at the administrative penalties, the Authority considered the financial benefit that Banxso and its key persons derived from their unlawful conduct”.
“This included an assessment of the extent to which client funds were misappropriated, the gains accumulated through misleading practices, and the overall economic advantage obtained as a result of the misconduct.
“The FSCA also considered the seriousness, deliberateness, extent and impact of the conduct on clients and on the integrity of the financial sector.
“These factors collectively informed the quantum of the penalties and serve as a strong deterrent against similar misconduct in the market.”
The statement added that: “Given the seriousness and extent of the misconduct, the FSCA has decided to report the matter to the South African Police Service (SAPS) and to share all the evidence obtained during the investigation with SAPS. The Authority will also provide active assistance to SAPS, if requested.”
ALSO READ: ‘AfriMarkets onboards 80 clients daily from fake ads’ – former employee
Banxso response
Banxso responded in a statement late on Tuesday night:
“We acknowledge the seriousness of the FSCA’s action and are treating this matter with the urgent attention it demands. Our legal teams have been immediately engaged and basis for the penalties imposed.
“While we respect the regulatory framework within which we operate, we maintain our position that there are significant issues that warrant thorough legal examination. We are not in a position to detail our legal strategy at this stage, but we can confirm that we are exploring all available mechanisms to address what we believe to be fundamental concerns with this outcome.
“The stakeholders remain committed to the principle that every party deserves fair treatment under the law, and we will pursue every appropriate avenue to ensure that this matter receives the scrutiny it warrants. Our focus continues to be on achieving a just resolution for all affected parties.
“We understand the impact these developments have on clients, partners, and the broader community. Further updates will be provided as our legal review progresses and as we determine the most appropriate course of action.”
This article was republished from Moneyweb. Read the original here.
