Fines and debarment for running Praesidium Group like a pyramid scheme

Fines and debarment from the Financial Sector Conduct Authority (FSCA) are waiting for the directors of the Praesidium Group because they ran it like a pyramid scheme until it was liquidated.

Directors Craig Massyn, Andrew Cunningham-Moorat and Brett Bukes aided, abetted, induced, incited or procured the group to contravene the relevant financial sector laws, the FSCA found.

The FSCA finalised its investigations into the Praesidium Group of entities that include Praesidium Advisory Services (Pty) Ltd, Praesidium Wealth (Pty) Ltd, Praesidium Sentinel (Pty) Ltd and its key persons and found that Praesidium Advisory did not have the correct financial services provider (FSP) license to advise members of the public to invest in forex instruments.

It also did not have the correct license to receive client funds for the purposes of investment in forex instruments.

The Praesidium Group should also not have paid clients’ funds to Octox (Pty) Ltd or Imagina FX (Pty) Ltd, because these entities were not authorised FSPs and, therefore, could not lawfully receive client funds and/or act as investment manager.

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Little traded, nothing gained

According to a statement from the FSCA, once client funds were paid over to Octox/Imagina, Cunningham-Moorat and Bukes lost all control and oversight over it, while Massyn controlled and had access to client funds in the Octox bank accounts and on the trading platform. Massyn also conducted all the trading.

The FSCA forensic analysis indicates that only a small percentage (approximately 19.4%) of client funds were actually traded on the trading platform, with the balance paid back to clients (including Imagina clients) as investment returns and/or capital withdrawals, paid to the Praesidium Group of entities for operational expenses and paid to the directors.

The analysis also shows that the trading percentage returns declared to clients every month were provided by Massyn to Cunningham-Moorat and/or Bukes and they, in turn, declared it to clients. Praesidium Advisory’s statutory manager found that the positive trading returns Massyn declared could not be remotely possible considering that Massyn was making losses on the trading platform.

The balances reflected in the Ponzi trading account statements Massyn produced also indicated that there was insufficient money on the trading accounts and it would, therefore, appear that Massyn was operating a scheme.

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Key individual did not resign

Two key individuals at Praesidium Advisory, Cindy Lee Schuster and Ryan van Niekerk were approved, per product category, to manage and oversee the business of Praesidium Advisory. Schuster testified under oath that she resigned six weeks after being appointed. But a forensic analysis of the evidence she submitted demonstrated that she did not.

She continued to act as key individual after the alleged resignation and Praesidium Advisory continued its unlawful business during her tenure, the FSCA says, adding that it believes she did not have the operational ability to effectively oversee the business of the FSP.

Van Niekerk signed a document that was presented to clients that contained misleading and incorrect information. This document created an impression that Praesidium Advisory was appropriately licensed to conduct its business.

Based on the findings of the investigations, the FSCA made a preliminary decision on the appropriate sanctions that would be applied against the people investigated. This decision was communicated to the people involved and they had the opportunity to make submissions on the facts detailed in the investigation report and the preliminary administrative sanctions.

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FSCA’s final decision

After considering their submissions, the FSCA made a final decision to debar Massyn, for a period of 20 years, Bukes, for 10 years, Cunningham-Moorat for 10 years, Schuster for 5 years and Van Niekerk also for 5 years.

In addition, the FSCA also decided to impose administrative penalties of R20 million on Massyn, R6.5 million on Bukes, R2.5 million on Cunningham-Moorat, R300 000 on Schuster and R300 000 on Van Niekerk.

The FSCA will now formally bring this matter to the attention of the criminal prosecution authorities as it seems likely that several offences were committed, including fraud and theft.