Reserve Bank lashes Carmol 'Ponzi scheme'

25 January 2015 - 02:00 By Malcolm Rees
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The South African Reserve Bank building in Pretoria. File photo.
The South African Reserve Bank building in Pretoria. File photo.
Image: GALLO IMAGES

The South African Reserve Bank has slammed the auditors of Carmol, a suspected R450-million Ponzi scheme offering investors 96% returns, for providing false hope to scores of its bewildered investors by promising the repayment of frozen funds.

In November last year, the Reserve Bank obtained a court order preventing Carmol from dealing with any of its assets while taking measures to freeze bank accounts associated with the "petroleum distribution" scheme.

Auditing giant Ernst& Young was also hired to conduct an investigation into Carmol's activities amid concerns that the scheme had illegally taken deposits from the public without a banking licence.

But despite the court order Carmol appears to have appointed little-known accounting consultancy Afro RMM "to perform an audit of the money invested in its Standard Bank account", according to a letter signed by Carmol director Yunus Moolla in December.

In January, Afro RMM then sent a letter to Carmol's investors stating it had been appointed as auditors of the scheme and to "handle the affairs concerning the investment(s) ... made with them".

Afro RMM advised investors to supply it with information including copies of identity documents, banking details and contracts signed with Carmol "in order for us to expedite the repayment of ...investment(s)".

It also advised investors "that any future correspondence concerning your investment should be forwarded to Thabo Ramosa", Afro RMM's marketing director.

But this week, the Reserve Bank's banking registrar Rene van Wyk issued a damning notice, saying "any attempt by Afro RMM to deal with Carmol's assets in the manner suggested would be a clear contravention of the court order".

"The notice addressed from Afro RMM is accordingly misleading and members of the public are further advised to ignore the assertions made by Afro RMM in relation to the payment of funds invested with Carmol," said Van Wyk.

Others have also raised concerns about Carmol hiring Afro RMM.

Jame Skuse, from specialist Financial Service Provider Southern Cross Risk Management, said this "appears to be a tactic by Carmol to try and allay investors' fears".

"This, coupled with the current freezing of assets and bank accounts ... should actually create more cause for concern amongst investors who can expect a lengthy process to try and unravel something that has all the hallmarks of a Ponzi scheme at the point of self-implosion," said Skuse.

Skuse had aired suspicions that a closely associated company, Innovatech, appeared to be operating as an illegal scheme in September last year - prompting a Business Times investigation which exposed Carmol as a possible Ponzi scheme.

Not only did Carmol illegally take deposits, it offered investors returns which are outlawed by consumer protection laws.

This prompted the Reserve Bank to take action. The bank said its actions against Carmol were motivated by "a reasonable suspicion" that Carmol had acted as "an illegal deposit-taking scheme".

Duran Govender, an assistant to Carmol director Moolla, furiously refuted the claims that it was a Ponzi scheme.

However, Business Times could find no underlying business activity at Carmol which could justify its 96% annual returns.

It appears Carmol may have raised between R450-million and R1-billion from more than 2500 investors by the time it had its accounts frozen.

This week, Govender did not comment on these new allegations. But he did say, via e-mail: "You can go ahead and print the hearsay. Credibility is important in life. As a journalist, or company, or individuals. Keep that in mind."

Ramosa did not respond to e-mailed requests for comment, nor could he be reached by phone.

Standard Bank in the spotlight

QUESTIONS have been raised regarding oversight mechanisms at Standard Bank after it emerged that the continent's biggest bank had provided banking facilities to Carmol Distributors, a suspected Ponzi scheme.

Although it remains unclear as to the quantum of deposits made into the Standard Bank account, sources close to Carmol have suggested that the scheme secured in the region of R450-million to R1-billion from its investors since 2011.

This week, the SA Reserve Bank confirmed it had frozen Carmol's account with Standard Bank based on the "reasonable suspicion" that Carmol was acting as an "illegal deposit taking scheme."

Innovatech CEO, Prinasen Dhaver, claims that Carmol directors had boasted that they had "become one of Standard Banks top South African clients".

Standard Bank has refused to respond to questions on the matter "due to the ongoing investigation by the SARB on the alleged Ponzi scheme".

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