Alleged Ponzi scheme Supreme National Stockholdings (SNS Holdings), which has left more than 300 investors short-changed, is on the brink of being liquidated.
It has been given until July 24 to explain to the Pietermaritzburg high court why a recent provisional liquidation order should not be confirmed.
The couple who run the company, Sandile Clever Sibiya and his wife Nomalizo Prudence Sibiya, are out on R100 000 and R50 000 bail respectively.
It is alleged they defrauded investors of over R500 million. They face 14 counts of fraud, and counts of contravening the Bank Act and the Financial Advisory and Intermediary Services Act for allegedly operating like a bank and a financial advisory service.
The liquidation application is brought by Dumisani Mthethwa, Siyabonga Ngubane, Njabulo Masondo, Bonani Mkhwanazi and Sifiso Mthiyane. Mthethwa, a tax consultant, said in court papers that he has a R60 000 claim against the company.
He invested R300 000 and was promised R1,4 million in return over two years.
However, he only received four payments totaling R240 000. He said that numerous other people have also invested with the company.
“It would be impossible for the company to settle all those debts.”
The claims came about because the company was used as a “vehicle to operate a Ponzi-type scheme”, he said. It purported to conclude agreements with many people, in which the other party or “investor” would become a “partner” with the company, in a venture usually styled as a “truck and trailer acquisition agreement”.
Agreements promised huge returns on the contribution made by the investors.
He added that it could be inferred that the operations of the company could never generate sufficient income to meet or sustain the “guaranteed returns” that the investors would receive from the company.
Payments made to some investors in the early days of the scheme were paid out from money later received as “contributions” from other investors.
He said the company was used as a vehicle to operate a so-called “Ponzi scheme”.
It is thus insolvent because the total of the payments it undertook to make as “guaranteed returns” to the investors must have exceeded the assets which the company had.
Mthethwa added that after he invested his money, he found out about a court order freezing the company’s bank accounts and stopping it from selling any assets.
In total there was R137 325,75 in the company’s accounts as at December 23 last year. There appears to be no prospect of the company being able to settle all of its obligations to the “investors” who have paid money to it.
If the process of winding up the company is to begin, a liquidator will be able to take charge of its assets, realise them and ensure that ultimately there would be an equitable distribution among the creditors, he said.
In addition, a liquidator would also be able to investigate what has become of the monies received by the company and to take steps to trace assets which may have been purchased with that money and hidden elsewhere.