Krion 'a Ponzi-type scheme'

2009-07-28 22:16

Pretoria - The collapsed Krion investment scheme was a Ponzi-type scheme operated by an "organised crime family", the High Court in Pretoria heard on Tuesday.

Prosecutor Arno Rossouw said the scheme was a Ponzi, rather than a pyramid scheme, operated by a crime family with Marietjie Prinsloo as the matriarch.

The family comprised Prinsloo, her late husband Kobus Pelser, her present husband Burt Prinsloo, her daughter Yolanda Lemstra and husband Gerrit, her son Willem Pelser, and her niece Izabel Engelbrecht and husband Hendrick.

The seven have pleaded not guilty to 218 683 charges, including racketeering, money laundering, fraud, theft and contravening bank, companies, and tax laws.

Rossouw said in his opening statement pyramid schemes involved investors receiving compensation for finding new participants.

Unrealistically high interest

Ponzi schemes offered investors the promise of earning unrealistically high interest on their investments.

Rossouw said Ponzi schemes essentially started off insolvent because there was not sufficient underlying capital and assets as security for the investments.

The State's case was that Prinsloo and her family had between 1998 and 2002 operated an illegal Ponzi-type money multiplication scheme under various names, ending with Krion Investment Services.

The scheme allegedly grew rapidly from a small micro-lending business started by Prinsloo in her home in 1997 to a R1.6bn enterprise in which investors lost about R900m when it finally collapsed in 2002.

Rossouw said the State would present evidence that Prinsloo had misled the department of trade and industry and the SA Reserve Bank when they launched investigations into the scheme.

She allegedly minimised the extent of the scheme, at first claiming only to have taken investments from family and friends.

Later she assured authorities that all investments had been paid back and that all of her micro-lending businesses had been closed down.

Transferred investments

It is alleged that Prinsloo and her family had simply transferred investments to new entities, including unregistered companies, to avoid detection.

They allegedly continued taking new investments from the public despite being prohibited by the Reserve Bank from doing so.

The state alleges the enterprise had embarked on a systematic money laundering scheme to disguise the proceeds of the offences.

This allegedly included buying a large number of valuable houses, farms and buildings through a series of family trusts in which members of the family had an interest.

The trial continues before Judge Cynthia Pretorius.