The directors of Sharemax might soon find themselves in the dock.
The Financial Intelligence Centre (FIC), a government agency that fights money-laundering and so-called “terror financing”, has launched a criminal probe into the property syndication company.
A spokesperson for FIC would not confirm the investigation; but the Reserve Bank, which took financial control of Sharemax last week, stated that it was going to hand its information to the police for a criminal investigation and possible prosecution.
The Sharemax saga took a dramatic turn last week when the Reserve Bank announced it had appointed two statutory managers to investigate the finances of the company and repay investors.
André Prakke, a forensic auditor and long-time critic of Sharemax, said: “The problem is that there is not enough money to repay the investors. This is a fiasco that has the potential to be the biggest fraud scheme in this country’s history.”
Sharemax has for years been accused of operating a pyramid scheme – something the company has vehemently denied.
More than 30 000 investors have invested more than R5 billion in Sharemax. Many are elderly people who have invested their pensions and savings in one of Sharemax’s nearly 40 syndication companies.
Sharemax had offered them monthly interest or a dividend higher than the bank rate, coupled with capital growth.
The Reserve Bank ruled in May this year that Sharemax had contravened the Bank Act and that therefore most of the investments had been acquired illegally.
City Press reported in June that the ruling meant Sharemax would have to repay the investors. Sharemax then threatened the paper with legal action and said it was unprofessional and biased.
Shortly afterwards, investment dried up and Sharemax began to implode. Its managing director, Willie Botha, resigned and at the end of August Sharemax failed to pay monthly dividends to investors in its two largest syndications.
It then emerged that Sharemax owes the building contractor in its biggest project, The Villa shopping centre in Pretoria, more than R100 million.
Meanwhile, a saviour appeared in the form of Niki Vontas, a rehabilitated insolvent and managing director of a listed company, who offered to buy Sharemax’s property portfolio in a “paper transaction” for R5 billion.
The Sharemax directors provisionally accepted the offer, but Vontas later announced that he was no longer interested in acquiring The Villa and the second biggest syndication, Zambezi Retail Park.
Vontas told City Press there were “hundreds of millions of rands” missing in The Villa. “I told Sharemax that I want to know where the money is. Since then they have not spoken to me,” he said.
Vontas calculated that between R300 million and R600 million was missing. Prakke believes the figure might even be higher.
Thus far R1.65 billion has been invested in The Villa, with construction work done worth just more than R1 billion. Sharemax could have spent another R200 million to R300 million on commissions, fees, marketing and other costs.
There is no money left to pay the promised monthly dividends to investors and R1.2 billion is still needed to complete the centre.
The FIC has assembled a task team which is investigating fraud charges against Sharemax.
The deputy registrar of banks at the Reserve Bank, Michael Blackbeard, said his ruling on the contravention of the Bank Act would be referred to the police.
One of the statutory managers appointed by the Reserve Bank, Neels Alant, confirmed that investors would have to be repaid and said the bank must “find solutions”.
Prakke said that if the Reserve Bank could not find enough money to repay investors, the Bank Act required that it must be regarded as an act of insolvency.
“Insolvency is almost inevitable and if that happens, investors might wait for years to get something back. They can forget about receiving monthly dividends or interest. Dark days are awaiting investors,” he said.
Ironically, hours before the Reserve Bank appointed the managers, Sharemax issued a statement once again, blaming the press for spreading panic and untruths.
It still describes The Villa as an “excellent development”.