Two years after suspending the license of Praesidium Advisory Services when clients complained they could not retrieve their money, the Financial Sector Conduct Authority (FSCA) has imposed heavy fines and terms of debarment on the directors and key personnel of this now defunct company, having found that they contravened numerous financial sector laws.
In a statement released today, the FSCA said it had finalised its investigations into Praesidium Advisory Services and two associated companies, Praesidium Wealth and Praesidium Sentinel (referred to hereafter collectively as Praesidium).
Praesidium had invested clients’ funds, via an entity known as Octox, in a forex investment platform, Imagina FX. These entities were operated by one of Praesidium’s directors, Craig Massyn. The setup was essentially a Ponzi scheme, using incoming investor money to pay returns to existing investors, while providing investors with false data relating to the performance of their investments.
The FSCA said it found that Praesidium 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 company further should not have paid the funds it received from clients to Octox and Imagina FX, because these entities were not authorised FSPs and therefore could not lawfully receive client funds or act as managers of clients’ funds.
The FSCA found that, once the funds had been paid over to Octox/Imagina, the other two Praesidium directors, Andrew Cunningham-Moorat and Brett Bukes, lost all control and oversight over the money. “Massyn controlled and had access to clients’ funds in the Octox bank accounts and on the trading platform. He conducted all the trading,” the FSCA said.
Based on the FSCA’s forensic analysis, a small percentage (about 19.4%) of clients’ funds received was actually traded on the FX platform. The balance of the capital was:
- Paid back to clients as investment returns and/or capital withdrawals;
- Paid to Praesidium for operational expenses and;
- Paid to the directors.
Imagina FX was liquidated in early 2021. According to court documents from the liquidator, from July 2014 to October 2020, about R1.5 billion was paid into Octox’s bank account. As of October 2020, there was only about R21 000 left in the account. In total, more than R2 billion was received into the bank accounts of Imagina and Octox.
Praesidium Advisory Services had two key individuals, Cindy Lee Schuster and Ryan van Niekerk, who managed and oversaw the business. They, along with the three directors, were sanctioned as follows:
- Massyn was debarred for 20 years and fined R20 million;
- Bukes was debarred for 10 years and fined R6.5 million;
- Cunningham-Moorat was debarred for 10 years and fined R2.5 million;
- Schuster and Van Niekerk were each debarred for five years and fined R300 000.
The FSCA says it will now formally bring this matter to the attention of the criminal authorities “because it seems likely that several offences have been committed, including fraud and theft”.
Note: the companies referred to in this article have no connection with Praesidium Capital Management, a boutique asset manager based in Cape Town.
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