STARTLING ALLEGATIONS IN ECSPONENT CASE: FSRA: INVESTORS’ OVER E400M NEVER INVESTED

MBABANE – The over E400 million invested by members of the public and institutions in Ecsponent Eswatini (Pty) Ltd was allegedly not invested in any legitimate product to earn returns.

This is according to the Financial Services Regulatory Authority (FSRA), which alleged that Eswatini Investments (Pty) Ltd, formerly Ecsponent Eswatini (Pty) Ltd, operated a money laundering pyramid scheme. The regulatory authority was responding to Eswatini Investment Group (Pty) Ltd (ESWIG), formerly Escponent Eswatini (Pty) Ltd’s claim of E335 million, which went missing at Ecsponent Eswatini.ESWIG has instituted proceedings in court, where it is demanding the money from FSRA, which granted Ecsponent Eswatini a trading licence. Over 1 000 members of the public and organisations invested hundreds of millions of Emalangeni in Ecsponent, with the hope of earning returns.

Fraudulent

According to the Chief Executive Officer (CEO) of FSRA, Ncamiso Ntshalintshali, Ecsponent allegedly operated as a fraudulent money laundering pyramid scheme, which collected money from investors, with the promise of attractive investment returns. He told the court that the money was not invested in any legitimate product to earn returns. The CEO submitted that a large portion of the money was reportedly paid to related entities, without any legal or commercial cause. He said some of the money was credited to some investors as redeemed capital and redeemed capital growth. According to Ntshalintshali, a portion was paid to investors as interest and dividends.

Payments

“The net result was that all the payments were derived from money deposited by investors. No payment was derived from investment activities, because the money was not invested in any way but funnelled through to ultimate beneficiaries and some of it paid to some investors,” alleged the CEO. The veracity of these allegations is still to be tested in court. FSRA is represented by Mangaliso Magagula of Magagula and Hlophe Attorneys. He informed the court that ESWIG was responsible for all the activities and it solicited the money from the investors. He mentioned that, when soliciting the money, ESWIG allegedly fraudulently misrepresented that it would be invested. However, said the CEO, ESWIG instead channelled the money to related entities.

“The first plaintiff (ESWIG) also used the money invested by the investors to pay directors’ fees, and commissions to consultants and brokers and to pay operating costs for the scheme. No part of the money was invested in a legitimate business venture that would earn returns. All returns paid to those investors, who were able to redeem their investments, were derived from money deposited by other investors,” said Ntshalintshali. He informed the court that it was ESWIG that allegedly collected the money from the investors and disbursed it as stated.
He pointed out that ESWIG collected deposits from the investors. Ntshalintshali stated that ESWIG and its related parties and entities were the beneficiaries of the alleged fraudulent activities.

“It created a fraudulent scheme, whereby it collected money from the second plaintiffs (investors) and laundered it to beneficiaries, who are related parties. The first plaintiff (ESWIG) defrauded the second plaintiffs and it is the first plaintiff that must account for the money it collected.  “The first plaintiff collected deposits from the second plaintiffs and also acted as a conduit for the funds to related party recipients, who received the money without any legal or commercial basis. In other words, without any quid pro quo.”  Some of the related parties who were recipients of the funds from the first plaintiff, according to Ntshalintshali, were shell companies.

Beneficiary

The CEO submitted that Ligagu Investments, trading as GetBucks Eswatini Limited, was allegedly the main beneficiary of ESWIG’s purported fraud. He said the company was the recipient of a large amount of the funds deposited by the investors with ESWIG and reportedly funnelled to related parties of the first applicant, including Ligagu Investments. Ntshalintshali further told the court that ESWIG allegedly orchestrated the fraud by collecting deposits from the investors and then acting as a conduit of those funds to related party beneficiaries.

According to the CEO, ESWIG operated a money laundering pyramid scheme. In the ongoing court proceedings, ESWIG is claiming payment of the sum of E 335 240 000. The claim, submitted Ntshalintshali, is for the money that ESWIG allegedly stole from the investors using deception. He said ESWIG collected the money under the guise that it was investing it on behalf of the investors and that it would yield attractive returns. “This representation was false and fraudulent. It was made with the intention of deceiving the second plaintiffs into investing in the first plaintiff’s pyramid scheme. The first plaintiff never invested the money. It used it to operate the pyramid scheme and funnelled it to related parties without any commercial or legal basis or quid pro quo. “The first plaintiff is now claiming from the first defendant the money it stole from the second plaintiffs and utilised largely for its own benefit. The first defendant is a taxpayer-funded supervisory authority.

Claiming

“In effect, the first plaintiff stole millions from the second plaintiffs and is now claiming the money from the taxpayer. It is the taxpayer that will ultimately be responsible for paying the first plaintiff the money it stole from the second plaintiffs if the first plaintiff were to be successful in its claim for payment of the sum of E335 240 000,” the CEO explained.  Ntshalintshali went on to tell the court that FSRA did not, in any way, participate in the fraudulent activities in question. He said FSRA was not a recipient of any of the monies stolen allegedly by ESWIG from the investors. He said at the time of licensing, ESIWG disclosed a legitimate business model to the regulator, in which the business was to be conducted,  as stated in the prospectus.

Ntshalintshali said ESWIG was licensed on the basis of these representations and disclosures. However, he said, it transpired after the collapse of the ‘scheme’ that ESWIG, in its business and operations, allegedly engaged in misleading and deceptive conduct, which induced the investors ‘to invest in the pyramid scheme operated by the first plaintiff’. The matter is pending in court.

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