Category

Criminal Law / Crime

Sep 25
0

How Does the New Corruption Reporting Law Affect Your Business?

By | Business, Criminal Law / Crime

“In defence of Madiba’s legacy, we will continue to wage a relentless war on corruption…” (President Cyril Ramaphosa)

You may have seen mention of the new amendment to the Prevention and Combatting of Corrupt Activities (POCCA) Act that imposes severe penalties for any failure to report corruption. If you did see it, you quite possibly thought “Doesn’t apply to me, I’m just a small business”.

Wrong! Let’s have a look at who the new law applies to, what it requires of you, the risk you run if you don’t pay it due attention, and how you should manage this new risk.

Who does the new reporting requirement apply to?

Not just big companies and multinational businesses. It applies not only to all members of “incorporated state-owned entities” but also to all persons and entities in the private sector. The definition here is very broad indeed, and it includes all types and sizes of businesses from sole trader up, all types of entity large and small, all companies, every “body of persons” and every “other legal person”.

In short, it applies to you!

What does it require of you?

Simply put, you must report any corruption or attempt at corruption. Of course, we all know what the common-sense definition of “corruption” is. If you need an exhaustive legal definition, we can certainly help you with that.

But in practice just be aware that it applies to any agreement or offer by an “associated” person (including employees, independent contractors and the like) to give anyone else any unlawful “gratification”. What’s more, “gratification” is so widely defined as to include every possible form of monetary or non-monetary advantage (or avoidance of disadvantage) you can think of. Naturally the agreement or offer in question must relate to an attempt to either obtain or retain a business advantage of some sort.

On another warning note, POCCA penalises not just active knowledge of corruption and wrongdoing, but also brings in concepts of “should have known” and “turned a blind eye”.

Put simply, you must report any form of “corruption”. Full stop.

What penalties apply?

In theory, the sky’s the limit here – unlimited fines and life imprisonment! In practice, courts will of course tailor the punishment to fit the crime. The bottom line: there are very clear indications that the authorities mean business, so beware.

How should you protect yourself?

The new law pulls no punches. But fortunately there’s a solid defence included in the new provision: to escape liability you only need to show that you “had in place adequate procedures designed to prevent” the corruption. There’s no definition of what this might entail, so it’s up to you to use common sense based on your particular business and circumstances. Local experts suggest that to be safe we follow the UK’s “Six Principles” – proportionality (procedures tailored to the level of your risk), top-level commitment, risk assessment, due diligence, communication, and monitoring and review.

Need help with drafting a corruption prevention protocol? Shout if we can help.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Jun 25
0

Home Buyer loses R5.5m in Phishing Scam – Don’t Make the Same Mistake!

By | Criminal Law / Crime, Property

“[The buyer] must in the circumstances take responsibility for her failure to protect herself against a known risk” (extract from judgment below)

Cybercriminals absolutely love targeting property transactions because they provide the perfect mix of large money deposits, heavy reliance on email communication from trusted parties like attorneys, banks and estate agencies, and deadlines creating a sense of urgency and lack of attention to detail.

Let’s consider just one recent example of a high-value BEC (Business Email Compromise) attack on the purchase of a house.

A textbook case costs a pensioner R5.5m
  • A woman describing herself as “an elderly divorced pensioner without the knowledge, experience or resources to protect herself against sophisticated cybercrime of which she had no knowledge or experience” purchased a house for R6m.
  • She paid a R500k deposit to the estate agents, and then after an exchange of emails with her appointed conveyancers, she paid the balance of R5.5m into what she believed to be the conveyancing firm’s account.
  • In fact, her email system had been hacked and the criminals were intercepting and altering both her incoming and outgoing emails. In a typically sophisticated operation, they ensured that the mails and attachments looked genuine, deceived the buyer into paying the R5.5m into their fraudulent account, and then, via a further chain of back-and-forth emails, delayed detection of the fraud for long enough to give them time to withdraw the funds and disappear.
  • The buyer sued the conveyancers for her R5.5m loss, arguing that they had a legal duty to protect her from the BEC. The High Court agreed and ordered the firm to pay her back, but that was reversed on appeal to the SCA (Supreme Court of Appeal).
  • Critically, the SCA held that in cases of “pure economic loss”, creditors have no general legal duty to protect their debtors from the interception of payments, and there is no inference of “wrongfulness”. So, it is up to the client in such a claim to prove not only negligence by the business, but also wrongfulness.
  • In this particular case the Court found that the buyer had “ample means to protect herself”. It was not the conveyancers but the compromise of her email account that enabled the criminals to intercept her emails. She could have paid by bank guarantee but chose to pay in cash. Moreover, she had been warned by the estate agency about this very risk and had heeded the warning and verified the agency’s banking details before paying in the deposit. She could, and should, have taken the same precaution before paying the conveyancers.
  • Bottom line – the buyer “must in the circumstances take responsibility for her failure to protect herself against a known risk” and must bear her R5.5m loss herself.
How to protect yourself – 5 steps to take immediately
  1. Whether you are business or client, protect your systems from being hacked. Constantly update all your software and anti-virus/anti-malware programs. Use 2FA (two factor authentication) on your accounts. If it is your email system that is hacked and causes the loss, you have a problem! As a business you could also be in trouble for breaching POPIA (the Protection of Personal Information Act).
  2. Constantly warn everyone about the risks of email interception and fraud and remind them never to accept any change of banking details notifications without checking.
  3. Protect all attachments from alteration (including PDFs!).
  4. Before making deposits, phone to confirm all banking details you are given via email. Make sure to phone a number you have confirmed to be genuine – criminals regularly provide fake contact numbers in intercepted emails and documents.
  5. Carefully check all email addresses as scammers often make subtle changes – in this case for example the buyer failed to notice that the word “africa” in an email had been changed to “afirca”. Other common dodges are changing numerals or adding/removing hyphens.

Above all, treat all email communications as inherently unsafe and don’t let your guard down for a second!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Jun 25
0

The New Cannabis Act: Here’s What You Will and Won’t Be Allowed to Do

By | Criminal Law / Crime, General Interest

“It’s high time they legalised cannabis” (Anon)

Much excitement has greeted the signing into law of the Cannabis for Private Purposes Act, which will formally regulate the cultivation, possession, and use of cannabis by adults in a private setting and, says the Presidency, lays the groundwork for regulatory reforms “to allow for the industrialisation of the cannabis sector.”

But although the new Act has been widely reported in the media as though it is already in force, this is not correct – it will only come into effect when its commencement date is gazetted. It is not clear at date of writing when we can expect this to happen, but it could be a lengthy process. Until then the rather vague parameters for private and personal use, possession and cultivation set by the Constitutional Court in 2018 will presumably remain in place.

In the interim, here are some highlights of the Act –

What is “cannabis” in the new Act?

“Cannabis” is defined for the purposes of the Act as meaning “the flowering or fruiting tops of a cannabis plant and includes products made therefrom” (i.e. “buds”, extracts, oils and the like) but the definition excludes “any seed, seedling, the stalk, leaves and branches.”

What you will be able to do, and what you won’t

In a nutshell, it will be legal within prescribed limits to grow, possess, use and share cannabis in private, but not to sell it. More specifically, and with the general requirement of “private purpose” –

  • In private: Any adult (18 or over) will be able to cultivate, use, possess and share cannabis “in a private place for a private purpose”. But not in the presence of a child or non-consenting adult, and not “if it is likely to cause a disturbance or nuisance to any person” in a nearby public place. Note that when it comes to sharing (supplying or obtaining), there cannot be any exchange of “consideration” defined as “any form of compensation, gift, reward, favour or benefit” (i.e. sale for recreational as opposed to medical use will remain prohibited, even for private purposes). The prescribed “maximum amounts” (see below) will apply in private as well as in public places.
  • In public: An adult will be able to possess (subject to prescribed maximum amounts), but not to use, cannabis in a public place.
  • Protections for children: No child (person under 18) can be given cannabis or any cannabis product, nor be allowed to possess or use it without a medical prescription, nor can they be used to deal in it. Importantly, any adult “who is in possession of cannabis must take reasonable measures to ensure that such cannabis is inaccessible to a child whether that child is under the authority, supervision or care of that adult person or not.”
Maximum amounts will be prescribed, and transport will be regulated

Regulations will prescribe –

  • The maximum amounts allowed for cultivation, possession and transport of cannabis.
  • “Conditions, restrictions, prohibitions, obligations, requirements or standards regarding the transportation of cannabis, by the person transporting cannabis as well as in respect of the passenger in such transport.”

Current speculation (i.e. you can’t hold us to this!) is that the prescribed amounts will be based on those proposed in a version of the Bill which was not incorporated in the final Act. That Bill proposed that adults would be able to –

  • Possess unlimited seeds and seedlings.
  • Privately cultivate four flowering cannabis plants per person (or eight per household occupied by two or more adults).
  • Privately possess 600 grams of dried cannabis per person (or 1,200 grams per household occupied by two or more adults).
  • Publicly possess 100 grams of dried cannabis or one flowering cannabis plant.
  • Provide/obtain for personal use 30 seeds/seedlings, 1 flowering cannabis plant, 100 grams of dried cannabis.

Note however that the 2020 Bill’s structure is different to that of the final Act, so wait for the final Regulations before relying on any of these speculated limits!

Criminal records to be expunged

Convictions for possession and use of cannabis (dagga) will be automatically expunged, as will convictions for dealing based on legal presumptions rather than actually dealing. Where records have not been automatically expunged, they will be expunged on application.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Jan 29
0

You Can (and Should) Both Discipline and Prosecute Thieving Employees

By | Criminal Law / Crime, Employment and Labour Law

“It’s the profile of the most trusted individual, in a position of trust, like an accountant or bookkeeper. They usually never take leave, and someone who never allows anyone access to their system would go to the length of taking their laptops with them while they are on holiday so that they can continue working. They are usually caught in the moment of forced absence from work.” (Specialised Commercial Crimes Court as reported by News24)

Our courts report a surge in serious cases of theft from employers by their most trusted employees – often bookkeepers and accountants. The greater the trust placed in these dishonest individuals, the more they steal and the longer they get away with it.

Particularly in more serious cases, employers should lay criminal charges as well as instituting disciplinary proceedings. Criminal courts are imposing hefty deterrent sentences, and the Labour Court has confirmed that laying charges does not prejudice the simultaneous disciplinary process.

Minimum sentences apply

Firstly, minimum sentencing provisions apply when large amounts have been stolen. Even first offenders must be sentenced to a minimum of 15 years’ imprisonment for any fraud or theft involving more than R500,000 (R100,000 for persons acting together or R10,000 for law enforcement officers) unless “substantial and compelling circumstances exist which justify the imposition of a lesser sentence”.

Let’s look at some recent cases –

  • 50 years for a R537m theft: Over some two decades of employment in a position of trust as an accountant, an employee admitted to 336 counts relating to thefts totalling an astonishing R537m. She had tried to cover up with fraudulent VAT claims and although her lavish lifestyle (she spent R5m on one specific day) attracted attention, it seems that it was only an anonymous tip off that eventually led to her detection and arrest. She was sentenced by a Specialised Commercial Crimes Court (SCCC) to 50 years behind bars.
  • 10 years for a R13.4m fraud: A creditor’s clerk, once again in a position of trust, pleaded guilty to 972 counts of fraud totalling over R13.4m and stretching over 9 years, only discovered when she went on sick leave. The mitigating factors in her case (she has health issues and is 65 years old) led the High Court to reduce her 15-year sentence to a below-the-minimum 10 years.
  • 18 years for a R14m theft: A financial manager stole over R14m, leaving the couple who had trusted him with their finances without their life savings (including a cancer diagnosis payout) and on their knees financially and emotionally. The Court’s sentence of 3 years more than the minimum reflected its finding that the aggravating factors justified removing the manager from society, despite his gambling addiction and previous clean record.
  • 15 to 30 years for a R52m fraud? A trusted store accountant “viewed as a brother” by its traumatised owners (one of whom even contemplated suicide), admitted to two counts of fraud totalling R52m as a result of his gambling addiction. He will only be sentenced in March, but it seems from media reports that he is unlikely to receive less than the minimum 15 years’ imprisonment per count, possibly to run concurrently.
The Labour Court confirms you can do both

A municipal manager with 15 years’ service was criminally charged with very serious frauds. He asked the Labour Court to stop his employer’s disciplinary process against him, arguing that in defending himself at the disciplinary hearing he might have to give self-incriminating evidence.

The Labour Court disagreed, finding that the employee had several layers of protection available to him in the criminal trial, and clearing the employer to proceed with the disciplinary hearing simultaneously. In fact, said the Court, “It is tantamount to an abuse of court process by a person holding a managerial position using court processes to prevent his employer from subjecting him to a disciplinary process under the guise of protecting his constitutional rights.” It accordingly ordered him to pay all costs on the punitive attorney and client scale – a very unusual censure in labour law matters where both sides are normally left to cover their own costs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Jan 27
0

Check All Emailed Bank Details for BEC (“Business Email Compromise”) Frauds

By | Criminal Law / Crime, Property

“…sending bank details by email is inherently dangerous, and so must either be avoided in favour of, for example, a secure portal or it must be accompanied by other precautionary measures like telephonic confirmation or appropriate warnings which are securely communicated.” (Extract from judgment below)

Before you make any payment to a supplier’s bank account on the basis of an emailed invoice, check that the bank account details in the invoice are genuine.

If your supplier’s or your email system have been hacked in a BEC (“Business Email Compromise”) scam, the invoice details could easily be fraudulent and if so you will be paying into a scammer’s bank account.

Property transactions are prime BEC targets, but not the only ones!

You will have seen many warnings about the global problem of conveyancing email scams, where emails are intercepted and false bank account details appear in invoices or in the mails themselves.  Property sales are usually high value transactions and thus a natural target for fraudsters.

Increasingly though, other non-property related business-to-business and business-to-customer transactions are being targeted – the higher the value of the deal, the more likely it is to be subjected to online crime.

Let’s take a topical example…

It’s high-value inverter time, and the bad guys are taking note…

You decide to install a high-value inverter, courtesy of Eskom’s “no end in sight” loadshedding. Inverter installers – let’s call them “Speedy Sparkies Inverter Systems” – email you a quote for R145,000. You accept. Back comes an emailed invoice from fred@speedysparkies.co.za asking you to pay R100,000 upfront to cover materials. You transfer R100k to the X Bank account on the invoice and ask when they will install. The friendly return email reads “Thanks for the payment, we’ll fit you in next week Thursday. Best, Fred”.

Thursday rolls around but no Fred. You phone him. “But you haven’t paid us yet” says Fred. “Yes I have, I paid into your account last week and you emailed confirmation of receipt of payment”. “No, definitely no payment received and no email from us confirming receipt.” “That’s impossible Fred, I have your email in front of me”. At which stage you notice, with a sinking heart and rising panic, that that last email came from fred@speedy-sparkies.co.za – with a hyphen. “Nope, really sorry” says Fred, “there’s no hyphen in our email address and we bank with Y Bank not X Bank. You’ve been scammed. We’ll try to help you but you need to pay the R100k again before we can install”.

Denial, anger, acceptance, then off to the bank to ask for help and off to SAPS to lay charges. Your bank and the police are sympathetic but not hopeful of recovery. So what happened?

How did you just lose R100k?

Using phishing tactics, the scammers hacked into Speedy’s email system then monitored all their emails, waiting for a high value contract to pop up. They pounced, intercepted the email to you with the invoice, changed only the return email address and the bank account.

You suspected nothing – the look and feel of the email and invoice are totally genuine, the wording of the mails is Fred’s (right down to his trademark sign-off “Best, Fred”), the email address difference is so subtle you don’t notice it. Sometimes scammers can even “spoof” an email address, where the sending email address appears to be the same as the legitimate one.

It all looks 100% authentic and of course by the time you and Fred realise anything is amiss, your money is long gone.

The only winners here are the scammers and the question now is “who is the loser?”

Who takes the loss? Who pays for your inverter now? Can you sue?

Here’s the rub – you blame Speedy for allowing their system to be hacked. You accuse them of negligence and of failing in their duty to keep your data safe in compliance with POPIA (the Protection of Personal Information Act). But Speedy deny fault and say you carry the risk and anyway it’s your mistake for not noticing the falsified email address and for not phoning Fred to check the bank account details. Speedy’s insurers confirm they have no cover for this sort of fraud.

Do you have a legal claim against the business? There’s no cut-and-dried answer to that, with our case law outcomes to date tending to vary with each particular set of facts, and the courts referring to various questions of proving negligence, compliance with payment instructions, “considerations of legal and public policy”, and reference to a general rule that anyone making a payment to someone else is required to check that they are paying into the correct account.

So as a customer, it’s probably safest to work on the basis that you could well be held to be the party at risk and will almost certainly have to prove (at the very least) negligence on the part of the business in order to stand a chance of establishing any claim against it.

As a business on the other hand, your legal position is far from secure. You will be accused of negligence (and perhaps also breach of POPIA) if it is your system that was hacked. Even if it is your customer’s email account that has been hacked you are still at risk, as confirmed by the recent High Court award of R5.5m (plus interest and costs on the punitive attorney and client scale) in just such a case against a conveyancing firm on the basis of its legal duty of care towards a property purchaser, and on a finding that “but for the negligent transmission of its account details and failure to warn [the buyer] upfront of the inherent danger of BEC, she would not have suffered the loss.” In the Court’s words “sending bank details by email is inherently dangerous, and so must either be avoided in favour of, for example, a secure portal or it must be accompanied by other precautionary measures like telephonic confirmation or appropriate warnings which are securely communicated”.

On a strictly practical level, your reputation is at stake and those 5-star Google Reviews could be in for a knock.

Bottom line – take legal advice specific to your case. Perhaps you will both be advised to cut your losses and to share the pain 50/50. Far from ideal, but a lot better than protracted and bitter litigation.

Prevention being as always a lot better than cure, we share below some ideas on how to protect yourself from this sort of cyber fraud in the first place.

Prevention – here’s what to do
  • Businesses: Most importantly, protect your systems from being hacked! Train all staff in the increasingly sophisticated nature of phishing emails, update all your software and beef up your anti-virus and anti-malware protections and protocols. Consider not putting your banking details on invoices and tell customers to phone you to check any details they are given. Consider using a secure payment portal with two-factor authentication (2FA) and protect any PDF documents you send (it’s a myth that PDFs can’t be altered). Tell customers on every email that you will never advise any change of bank details by email. Check with your insurers whether you can get cover for this risk.
  • Customers: Take the same strong anti-hacking measures. Never pay anything without checking bank details direct with the business, either in person or telephonically (don’t use the phone numbers on the emails or invoices, they could easily have been faked as well). Check email addresses carefully – make sure the return address is the same as the sender’s address (some tips on how to do that here), watch for subtle changes like ‘.co.za’ becoming ‘.com’ or vice-versa, and remember that every hyphen, every letter and every number in the email address counts. Use bank-defined beneficiaries for online banking where possible. Be very suspicious of any “we’ve changed our banking details” communications.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Jan 03
0

“Double Jeopardy” for Tax Evasion – Penalties plus Prosecution

By | Criminal Law / Crime, Tax

“Administrative penalties and criminal proceedings do not serve the same purpose. The [one] is aimed at strengthening internal controls of the administrative authority and to promote compliance while the other is aimed at correcting a behaviour that caused harm to the society.” (Extract from judgment below)

SARS has announced major crackdowns on tax defaulters, and a recent High Court decision highlights the dangers of being caught out for “intentional tax evasion”.

R1.3m prejudice to SARS
  • A close corporation (CC) registered for both income tax and VAT (value added tax) rendered “nil” returns to SARS over a four-year period, indicating that no income had been generated and no expenses incurred.
  • After a tax audit, SARS determined (and the CC admitted) that the returns were false and that SARS had in consequence suffered prejudice of R819,607 on VAT and R493,600 on Income Tax.
  • SARS levied 10% late payment penalties and further imposed a 150% understatement penalty on both Income Tax and VAT. The 150% was imposed for “intentional tax evasion”.
  • Both the CC and the member were then also charged criminally for intentional tax evasion.
Both penalties and prosecution – is that “Double Jeopardy”?

They applied to the High Court for a declaration that the relevant sections of the Tax Administration Act are invalid, arguing that it is inconsistent with the constitution to “criminally punish the taxpayer twice for the same criminal offence of intentional tax evasion.”

Which raised the question of whether or not this was a case of “double jeopardy” – the legal rule that “no one may be punished for the same offence twice.” You cannot, in other words, be repeatedly prosecuted for the same offence.

But, held the Court, “nothing precludes civil administrative proceedings and criminal proceedings from the single act”. Double jeopardy does not apply in a case such as this where “calling the taxpayer to account for the wrongdoing before an administrative body as well as the criminal are two distinct processes”.

In other words, both the CC and the member, having been subjected already to hefty administrative penalties (that 150% understatement penalty must hurt particularly badly!) now face criminal prosecution as well. Criminal records, substantial fines and direct imprisonment are all on the table.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Mar 07
1

Mirror Trading International victims get offered payout

By | Criminal Law / Crime, Insolvency / Liquidation, News

Mirror Trading International’s liquidators have offered to demonstrate good faith to victims of the alleged pyramid scheme by paying a portion of their claims.

In exchange, those who want to take the deal must withdraw their opposition to the liquidators’ application to have the court declare Mirror Trading International (MTI) an unlawful scheme.

According to the court order, which MyBroadband has seen, the deal is conditional on the High Court finding that the business of MTI was conducted illegally.

Victims who have not opposed the application to declare MTI a pyramid scheme can also take up the deal.

The liquidators stated that this deal is available to all “true losers” of MTI — those who did not withdraw more than the rand value they put into the scheme.

This is an important detail, as MTI took deposits in bitcoin. However, the bitcoin value must be converted to rand using Luno’s exchange rate at the time of the deposit and withdrawal for the purposes of the deal.

Johann Steynberg

Johann Steynberg, Mirror Trading International CEO

Mirror Trading International was a network marketing scam that claimed to offer automated bitcoin-based trading services — initially in forex and later in cryptocurrency derivatives.

MTI made headlines in September 2020 after MyBroadband exposed the inner workings of the scheme, thanks to a data leak from a group calling itself Anonymous ZA.

The scheme collapsed at the end of 2020 after CEO and founder Johann Steynberg skipped the country, disappearing in Brazil.

Steynberg was arrested in Brazil a year after he disappeared, on 29 December 2021, after allegedly presenting fake identification to law enforcement officers.

Chainalysis named MTI the biggest cryptocurrency scam of 2020.

Johann Steynberg arrested in Brazil in December 2021

Court documents gave the last estimate of the funds that flowed through MTI as 29,421.03379 bitcoin — over R20 billion at current exchange rates.

However, a source with knowledge of the case told MyBroadband that the latest analysis shows that more than 46,000 bitcoin (R31.3 billion) flowed through the scheme.

With the help of the Financial Sector Conduct Authority, the liquidators managed to reclaim 1,281 bitcoin in early 2021 from Belize-based brokerage FXChoice.

They immediately sold the cryptocurrency and ended up getting a favourable rate, liquidating it for around R1.1 billion.

The same amount of bitcoin would fetch around R870 million at today’s exchange rates.

The deal — 20c in the rand

While the liquidators have yet to accept any victims’ claims at a creditors’ meeting, MyBroadband understands that there have been R355 million in claims previously submitted to the Master of the Court.

MyBroadband had heard from several people in court on Wednesday, when this deal was hatched, that the liquidators will pay the victims an initial dividend of 20c in the rand.

In a statement issued on Thursday, the liquidators said they made the deal with a group of net-losers and specifically a controversial group called GetaQuid, represented by JC Kriel.

GetaQuid says it represents 15,000 investors, according to the liquidators.

“The settlement with the groups of creditors is welcomed by the liquidators and seen as very constructive steps towards finalising one main area of the administration of the estate, namely the processing of claims of true losers, who are entitled to a dividend as soon as possible,” the liquidators stated.

MyBroadband spoke to GetaQuid’s legal representative Ruann Kruger and asked why the deal wasn’t for 100% of the claims.

Kruger explained that the liquidators would first verify claims against the MTI database in their possession.

Verified claims go to a provisional liquidation distribution account, after which they will receive an interim dividend, likely somewhere between 10% and 30% of the claimed amount.

“They don’t want to pay out too much to the first claims, and then there’s nothing left for claims that come in later,” Kruger said.

He said that the liquidators have committed to expediting claims as much as possible and will meet every few months to approve further payments.

MTI victims should be aware that GetaQuid charges a fee for its services and that it is not necessary to go through them to use this deal.

Kruger said it was not unusual for class action groups to ask members to contribute to help cover its expenses.

The liquidators said they would shortly upload a written consent which investors are encouraged to download, sign and submit together with their claim.

MTI pyramid scheme hearing delayed — again

The application to have MTI declared an unlawful scheme was postponed to 29 April 2022.

According to the liquidators, this was the fault of MTI 50% shareholder Clynton Marks.

They stated that Marks had inundated the court by filing voluminous papers during the week — and had done the same on several previous occasions.

It is interesting that the liquidators single out Marks, as they had responded to at least two thick stacks of papers in the past week — an affidavit from Henry Honiball, and a supplementary affidavit from Marks.

Both filings were well over 200 pages. Honiball also filed a supplementary affidavit of 87 pages.

“Mr Clynton Marks still opposes the application of the liquidators to declare MTI an unlawful scheme and alleges that he does so as the protector of creditors of the scheme,” the liquidators stated.

“This is, of course, false: he is one of the biggest winners in the scheme, and his agenda is simply to try and avoid a day of reckoning in terms of paying back and having to testify further.”

The liquidators said their Cape Town legal team worked non-stop to respond to his late and irregular filed papers. Some of this work lasted until the evening before court on Wednesday.

“The liquidators have no doubt that the agenda behind the late filings was simply to place the liquidators and the court in an impossible position to deal with all the papers in the short time available.”

Marks denied the accusations in a statement sent by his wife, Cheri.

“The statements by the liquidators are both untrue and defamatory, and we will not be commenting on this matter in the media,” they said.

Article by: mybroadband.co.za

Mirror Trading International victims get offered payout (mybroadband.co.za)

Mar 07
0

MTI liquidators agree to process net losers ahead of winners

By | Criminal Law / Crime, Insolvency / Liquidation, News

Liquidators for the failed Bitcoin scheme Mirror Trading International (MTI) this week agreed to ring-fence and process the claims of net losers ahead of the net winners, some of whom are waging court battles to hold on to their winnings.

This follows a high court application brought by MTI investor Chris Kriel, representing 15 000 net losers in the scheme under an ‘MTI recovery group’ named Get a Quid, seeking to postpone scheduled inquiries into the scheme and to remove the liquidators on the grounds of irregular conduct.

Of the tens of thousands of claims submitted to the liquidators, only one has been accepted, that of JNX Online which is a company previously controlled by MTI founder Johann Steynberg and subsequently placed in liquidation.

Claims rejected

This created outrage among the many thousands of people who have submitted claims to the liquidators. At the second meeting of creditors in February 2022, the Master said the claims were rejected on the grounds that they were “illegible”.

Read: Creditors voice fury at MTI liquidators after all investor claims rejected

In an affidavit before the Cape High Court, MTI investor Johannes Kriel notes that the liquidator of JNX Online operates from the same office as MTI liquidator, Herman Bester.

“It is thus apparent that, on the face of it, something is amiss,” deposes Kriel.

“In other words, the Applicants (the MTI liquidators) are required to only follow the instructions of the single proved creditor in an estate which is indebted to hundreds of thousands of investors in many millions of rands (if not billions).”

The agreement between net losers and the liquidators outlines the process to be followed for claimants to verify and prove their claims.

Two groups

Ruann Kruger, the attorney representing Johannes Kriel and the net losers, says the claimants are now clearly split into two groups – the winners and losers – so that the payout of valid losers’ claims is not delayed by court cases being opposed by the big winners.

“We can assist the liquidators. We will now have access to the back office data, just as they do, so we can help in determining who were the losers and whether their claims are valid or not.

“We can also help with the winners, who will probably have to pay back into the scheme if they drew out more than they put in,” says Kruger.

“This of course is dependent on whether MTI is declared an unlawful scheme, and that case will be decided on 29 April.”

MTI drew in hundreds of thousands of investors from around the world on the promise of returns as high as 10% a month, but collapsed in December 2020 when Steynberg fled to Brazil and the company put a stop to all requests for withdrawals.

Read: MTI’s Johann Steynberg arrested in Brazil

Johann Steynberg, MTI, Mirror Trading International

MTI founder Johann Steynberg fled the country when the scheme collapsed. Image: Via Youtube

MTI was declared the world’s biggest crypto scam in 2020 by Chainalysis. By some accounts, more than 29 000 bitcoin passed through the system, representing about R20 billion at current bitcoin prices.

The liquidators are attempting to have MTI declared a Ponzi scheme, which would mean any proceeds derived from the scheme are unlawful and must be repaid. That case has now been postponed to April 29.

The liquidators say only 1 300 claims have been received, out of nearly 200 000 MTI members.

MTI solvent?

In a separate case before the Cape High Court, 50% MTI shareholder Clynton Marks argues that MTI cannot be deemed insolvent as it has recovered bitcoin worth roughly R1.3 billion and has claims totalling just R300 million. The old Companies Act and the Insolvency Act only allow for the winding up of a company unable to pay its debts.

Marks is opposing the application to declare MTI an unlawful scheme. In a circular to creditors, liquidator Riaan van Rooyen says Marks is one of the biggest winners in MTI “and his agenda is simply to try and avoid a day of reckoning in terms of paying back and having to testify further”.

“The settlement with the groups of creditors is welcomed by the liquidators and seen as very constructive steps towards finalising one main area of the administration of the estate, namely the processing of claims of true losers, who are entitled to a dividend as soon as possible,” adds van Rooyen.

Read: MTI liquidators chasing down an additional R2bn in ‘possible debtors’

“With the massive representation of Mr Kriel and the [Get a Quid] group, the liquidators are confident that the investors (creditors) will now realize that the liquidators continue to act in their best interest and the liquidators wish to extend their gratitude to the leaders of the groups, and their legal teams, for engaging the liquidators on this very important settlement affecting such a great part of creditors.”

Once the claims of the net losers have been validated and approved, the liquidators have agreed to convene a special meeting of creditors and prepare a first liquidation and distribution account detailing what dividends will be paid.

This agreement is conditional on the Cape High Court finding that the business of MTI was unlawful. All net losers are covered by the agreement, whether or not they are part of Get a Quid.

Article by Money Web.co.za | MTI liquidators agree to process net losers ahead of winners – Moneyweb

Author: Ciaran Ryan – Moneyweb

Jan 26
0

Using the New Cybercrimes Act to Protect Yourself

By | Criminal Law / Crime, General Interest
“…cybercrime has increased by over 300% during the COVID-19 pandemic – making it one of the biggest threats to businesses around the globe.” (Property 24 report)
The Cybercrimes Act, which has been years in the making, is now (with effect from 1 December 2021) at last largely in force. Although some provisions still remain on hold (most notably some of those relating specifically to “revenge porn” and the granting of protection orders), a whole range of unlawful cyber-related activity has now been specifically criminalized. The police have also been given wide powers of investigation, search, access and seizure, and the penalties for contraventions are substantial. The pandemic-forced shift to a “work from home, shop and communicate online” culture has reportedly seen cybercrime rocketing by 300%. As always our best protection from online criminals is prevention, but for anyone unfortunate enough to fall victim to them at least the new Act now provides us all with a layer of legal protection we haven’t had before – but only if we actually use it and report cybercrime.
The new crime categories
The Act’s provisions are detailed and complex, so this is of necessity just a very brief summary. But for most practical purposes what you need to know is that both individuals and organisations now face prosecution for any –
  • Unlawful access to a “computer system” or “computer data storage medium” (i.e. “hacking”).
  • Unlawful interception of or interference with data, computer programs, data storage mediums and systems.
  • Unlawful acquisition, possession, provision or use of passwords, access codes and the like (PINs, access cards and devices included).
  • Cyber fraud, forgery, extortion and theft.
  • “Malicious communications” (which would by definition include messages sent by email or via Social Media channels, WhatsApp and the like) to the general public, individuals or groups that –
    • Incite damage to property or violence to a person or persons,
    • Threaten a person or persons with damage to property or violence,
    • Disclose a “data message of an intimate image of a person” without that person’s consent, and regardless of whether the victim is identifiable in the image itself or only from a description or other related information. Moreover the image can be “real or simulated”.
A particular warning to Social Media users
Posting or sharing anything prohibited by the Act – perhaps particularly any of the types of “malicious communication” referred to above – could land you in some extremely hot water. Think before you post!
What about “revenge porn”?
As noted above, some of the Act’s provisions relating specifically to “revenge porn” are not yet in effect, but there are already prohibitions against it in other legislation, plus the offences mentioned above relating to disclosure of “intimate images” should at least partially assist victims in the interim. Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Dec 06
0

Another mystery investor emerges to rescue Africrypt investors at 65c in the rand

By | Business, Criminal Law / Crime, Information Technology Law / Cyberlaw, Insolvency / Liquidation

Barely a week after a mystery ‘white knight’ offered creditors $4 million (R64 million) to bail out investors in the failed Africrypt scheme, another mystery investor has appeared with a better offer of $5 million (R80 million), equivalent to 65 cents in the rand.

The first offer made in November was also for $5 million, though only $4 million of that would go to creditors, with the remaining $1 million (R16.13 million) going to the running of the company.

Read:

This latest offer of $5 million is a simpler offer, with a timeline of seven days for acceptance, after which the ‘white knight’ will purchase and take cession of the claims.

Africrypt collapsed in April after its accounts were supposedly hacked and emptied of all funds. But it turns out this was not the first hack to have plagued the founders of Africrypt – brothers Raees and Ameer Cajee – and their investors.

As Moneyweb reported, a previous investment scheme of theirs was supposedly hacked in May 2019, causing more than a few Africrypt investors to suspect foul play. Two hacks in less than three years seemed a stretch too far for some investors, who suspect the Cajees are now using proxies to make an offer of compromise with the hope of avoiding jail time.

Read: Lightning strikes twice for Africrypt’s Cajee brothers

The latest offer of 65 cents in the rand is on investors’ deposited amount, not the current value of the ‘hacked’ bitcoin or Ethereum.

Investors who deposited into Africrypt in September 2019 would have paid about R120 000 for their bitcoin – which is today worth about R800 000.

This offer effectively means investors will be paid out less than R80 000 per bitcoin, for an asset that is worth 10 times that today.

Africrypt was run by the Johannesburg-based Cajee brothers, who solicited funds from investors by promising returns as high as 10% a day using a computerised trading algorithm.

These promises were even more outrageous than MTI’s claims of 0.5-1.5% returns a day.

MTI was placed in provisional liquidation a year after failing to pay out members’ requests for withdrawals. MTI also claimed to have a computerised trading algorithm, though no evidence of this was found by the Financial Sector Conduct Authority (FSCA) when it looked into it.

Read:
An inside look at how MTI managed to prolong an extraordinary losing streak
Beware of scammers promising to recover MTI bitcoin, say liquidators

Similarly, there is no evidence the Cajees were trading the cryptos entrusted to their care.

The Cajees disappeared around the time of the alleged hack, and are believed to be in the Middle East.

The first offer to buy out the claims of Africrypt investors made in November came with a catch: anyone accepting the offer would have to withdraw criminal charges against the Cajee brothers and their affiliated entities.

This condition was likely unlawful, and is referred to as ‘compounding’ in law, which is agreeing not to prosecute a crime in return for a reward.

The second rescue offer presented to investors last Friday (December 3) carries no obligation to withdraw criminal charges.

The first offer specified that the Cajees would be employed by Africrypt, which would be resuscitated as a trading entity so that investors could potentially earn back their full investment.

Investors hoped this would provide them with an opportunity to interrogate the Cajees as to the circumstances surrounding the alleged hack, and whether it was a genuine hack or an inside job. The Cajees have maintained the hack was genuine, and denied any involvement in what some believe was a heist, according to the BBC.

The identities of both the first and second ‘saviour’ investors remain unknown, though Ruann Kruger, legal representative for the Africrypt liquidators, says the second investor is a company.

“I am prevented from disclosing the identity of the company at this stage due to a non-disclosure agreement,” he tells Moneyweb.

“We have no idea of the identity of the first investor,” he adds.

Kruger says so far 35 out of 181 investors have signalled their intention to accept the offer.

Says a representative for some investors: “There are of course suspicions that this offer is coming via a proxy for the Cajees, and that we are being paid out with [our] own money. Either way, this is a clever tactic by whoever the investor is. It’s a divide [and] rule tactic.

“What I see happening here is the smaller investors are going to accept the offer, then the larger investors will be dealt with piecemeal. It’s a clever strategy, but a high risk one, because I believe some of the investors will not accept this offer, and will hold out for a better offer.”

Attorney Gerhard Botha, who is representing some of the investors, says any offer of 65 cents in the rand in any liquidation situation is not a bad deal.

“You must remember that up to now, there’s been no offer on the table. There’s also no proof that there was a hack, and there’s no proof that the money was actually invested [by the Cajees]. There is a strong possibility that this is a great deal for the Cajees, both legally and financially, but at the end of the day investors will make a decision based on purely commercial considerations,” he adds,

In a letter to Africrypt investors sent out on Friday, the joint provisional liquidators say they had not received any further communication or feedback from the first “third party investor” on the amended terms of the compromise offer – which attempted to indemnify the Cajees against criminal prosecution.

This raises suspicions among investors that the Cajees were behind the offer, which they decided to drop when it was pointed out that they could not buy their way out of potential jail time.

The letter from the provisional liquidators says the second offer of compromise is “a good, firm and less complicated offer that is open for acceptance for the next seven days”.

Those who accept the offer will receive 65 cents in the rand for any proven claim within five days of signature.

Africrypt investors are reckoned to have deposited about R120 million, though the value of their stolen cryptos today is worth many times this amount.

Article by:  for moneyweb.co.za