Insolvency / Liquidation

Ponzi Schemes: Can Liquidators Claw Back 600% of Payouts?

By | General Interest, Insolvency / Liquidation

“MTl’s business clearly amounted to an unlawful ponzi-scheme, i.e. a fraudulent investing scam promising high rates of return to investors and generating returns for earlier investors with investments taken from later investors.” (Extract from the MTI judgment)

Recent media reports of the MTI (Mirror Trading International) liquidators making repayment demands of investors highlight once again the dangers of falling for “too good to be true” investment schemes.

The problem is that by their very nature, all pyramid schemes (including “ponzi” schemes) eventually fail, leaving the vast majority of investors with nothing but the hope of being awarded a partial dividend on their claims when the holding entity is eventually liquidated.

But what if an investor is one of the “lucky early birds” who got paid out before the scheme’s collapse?

Debunking the “early bird investor catches the worm” myth

A common myth is that the only losers in a collapsed pyramid scheme are those investors who didn’t get their money out in time, and that the “early birds” who did act quickly are winners in the equation.

The problem for them is that liquidators have wide powers to reclaim payouts made to investors (as creditors) before liquidation. The idea is that payouts by definition come from new money paid in by new investors, and that to be fair to them it is necessary to put everything back into the pot for all investors and other creditors to share according to their claims. But of course they only share in what’s left after all the liquidation costs and fees have been settled, and in a large and complex liquidation like MTI’s those costs will be particularly substantial.

The practical issue is that whatever was paid out to investors/creditors – both by way of the original investment and the “profit” on it – is likely to be claimed back by the liquidator. And the investor forced to repay everything is left with nothing but a concurrent claim in the liquidation.

Of course a liquidator’s prospects of recovery will be boosted if they can obtain a court declaration of unlawfulness of the scheme and invalidity of the investment contracts (as has already happened in the MTI liquidation), but let’s see how that could then play out in practice.

The liquidator’s options for recovery

To summarise the options available to a liquidator in recovering payouts made before liquidation –

  • “Voidable preference”: If the payout was made within six months prior to liquidation and immediately thereafter the company’s liabilities exceeded its assets, it is repayable to the liquidator unless the investor can prove that that the disposition was made “in the ordinary course of business” and without intention to prefer one creditor above another. That could be hard to prove in the case of a pyramid scheme.
  • “Undue preference”: If at any time a payout was made by the company with the intention of preferring one creditor above another, it is repayable to the liquidator if the company’s liabilities exceeded its assets at that stage. In this case, the onus is on the liquidator to prove the intention to prefer, but that may perhaps be easier to prove in a pyramid scheme scenario than in other corporate failure scenarios.
  • “Disposition without value”: Monies paid out to a creditor at any time must be repaid to the liquidator if the company received no “value” in return, subject to –
    •  Where the payout was made more than two years prior to liquidation, the liquidator must prove that immediately thereafter the company’s liabilities exceeded its assets.
    • But if the payout was made within those two years, the onus switches to the creditor to prove that immediately thereafter the company’s assets exceeded its liabilities. In the case of a pyramid scheme that may be impossible to prove.

    Note that the creditor in such a case will also generally lose their claim against the company.

  • “Collusive dealing”: If the liquidator can prove that a creditor colluded with the company to pay out monies with the effect of prejudicing creditors or of preferring one creditor above another, the colluder will not only forfeit their claim but can also be ordered to pay in a penalty of up to the same amount. A liquidator could for example try to prove that the investor/creditor was aware of the unlawfulness of the scheme at the time of the payout.
Even worse, could investors lose a lot more than they put in?

Media reports suggest that an MTI investor, who invested R20,000 and was paid out R21,000 shortly before liquidation, received a demand from the liquidators to repay not just his initial investment and profit, but for 600% of what he put in. The sum claimed (at date of writing) is R122,000, that being the current value of the bitcoin he initially invested – the argument being presumably that what was disposed of was “property” (bitcoin), in which case the liquidators would be entitled to reclaim either the bitcoin or its value at the date the disposition is set aside. The justification will no doubt be that that is what the company and its creditors as a whole have actually lost as a result of the disposition. If our courts agree with that view, being sued for a great deal more than the original investment will be a particular risk when the investment is a volatile asset like bitcoin.

The High Court has previously declared MTI an illegal and unlawful scheme and all agreements between it and investors unlawful and void, but that of course is only the first step for the liquidators in proving their claims against investors. Media reports suggest that many investors are lawyering up to oppose the claims so we must wait and see how it all plays out in the courts.

Regardless, the risk of not only losing the original investment but then also having to cough up a great deal more over and above that certainly does fire yet another warning shot across the bows of anyone tempted to invest in any scheme promising unrealistic returns. Prospective investors shouldn’t part with a cent until they confirm that the scheme is actually legitimate.

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

Creditors: How to Secure Your Claim with a Notarial Bond

By | Debt Recovery, Insolvency / Liquidation
You should always take as much security for your claims as you possibly can before advancing credit or lending money to a debtor. That’s because if your debtor fails and is “liquidated” (if a corporate) or “sequestrated” (if an individual), without security you will have only a concurrent claim in the estate. And with a concurrent claim, you will be lucky to get back more than a few cents in the Rand, because you will rank right at the bottom of the ladder after both secured creditors and preferent creditors (employees, SARS etc).
So, first prize is always to hold security for your claim
Having a “secured claim” greatly increases your chances of being paid out a decent amount (hopefully your claim in full), because the proceeds of the asset/s subject to your security are earmarked (after payment of some estate costs and the like) to paying out the claims of the “secured creditors” holding security over each particular asset. If your debtor owns immovable property, registering a mortgage bond over it will generally give you a very strong security, whilst with movable property you have various options. There are many options here, applicable to various types of claim in various circumstances – liens, cessions, tacit hypothecs, rights of retention and so on – but for the moment let’s have a look at the more general concepts of pledge and notarial bonds. One of the strongest options with movables is to take a pledge over them, but that will require you to actually hold the movables in your possession. And of course it’s not always viable for a debtor to give you that possession – a much more likely scenario with most business debtors is that they need to keep possession and use their assets (machinery, fittings, vehicles, stock etc) to carry on trading. So what are your options in that situation?
The two types of notarial bond
In that case – where you cannot take actual possession of the movables – consider registering a notarial bond over them.  There are two types of notarial bond, both requiring registration in the Deeds Office –
  1. Your first and best option is a special notarial bond. This gives you substantial security, in the form of a “deemed pledge”. You now have first bite at the cherry over any movable asset listed in the bond, even though you don’t have possession. Note that these assets need to be clearly identified in the bond (“….specified and described in the bond in a manner which renders it readily recognisable…”) so list full descriptions, models, serial numbers, and the like for every asset.
  2. Secondly, take a general notarial bond over all the debtor’s movable assets generally.  That will bring into your net those assets which are not individually identifiable, such as stock, building materials and so on. The bad news is that a general notarial bond in itself gives you only a weak preference on liquidation, but the good news is that you can convert that into full, “real”, security if you move quickly enough.
How do you convert a General Notarial Bond into full security?
Provided you seek legal assistance quickly at the first sign of financial distress in your debtor, you may well have time to “perfect” the bond into full security by way of a court order prior to liquidation. Armed with the court order you take possession of all the debtor’s movables and hey presto you have a “real” security over them. Let’s look at a recent example –
  • A supermarket group, owed over R2m by a trading store, held two general notarial bonds over its movable assets (presumably shop fittings, fixtures, equipment, stock etc).
  • Fearing that the store’s owner (a company) was trading in insolvent circumstances and would be liquidated, the creditor applied for an urgent High Court order allowing it to perfect its security.
  • The debtor opposed the application, asking the Court to exercise its discretion not to grant a perfection order. But the Court refused to do so, and granted the perfection order, on the basis that the creditor had no other remedy available to it (such as a damages claim). The Court was equally unimpressed with the debtor’s argument that the terms of the bonds were “unconscionable and contra bonos mores [offensive to conscience]”.
That’s clear judicial confirmation of the strong position you are likely to find yourself in where you hold properly drawn and registered general notarial bonds, and act quickly to perfect them in appropriate circumstances. 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

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.

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Mirror Trading International victims get offered payout (

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 liquidators agree to process net losers ahead of winners – Moneyweb

Author: Ciaran Ryan – Moneyweb

Debtor Not Paying? Consider a Liquidation Application

By | Debt Recovery, Insolvency / Liquidation
“When debtors once have borrowed all we have to lend, they are very apt to grow shy of their creditors’ company” (John Vanbrugh)
Bad debt is a major issue for many businesses in these hard economic times – not taking robust steps to collect it could be fatal to your own financial position. So if you are being given the run-around by a recalcitrant corporate debtor, take advice on whether an appropriate and cost-effective remedy for you might be an application for the company’s liquidation (“winding-up”). Cynical misuse of the liquidation process as a debt collection tool or to avoid any genuine disputes over liability is likely to end badly for you (you risk a heavy costs order for “abuse of process”). Be aware also that if your application is successful and a liquidation order is granted, you might be in for more than your own legal costs (ask for advice on the “danger of contribution” in winding-up matters). But properly used, a liquidation application will certainly get your debtor’s attention very effectively. It’s often the only strategy that has any effect on a “dodging debtor”. The threat of a liquidator knocking at the door to take over control of the company is a great motivator to actually do something – pay up, or make a genuine settlement offer, or at least disclose whether something is in dispute so you can deal with it. The practical challenge can however be in proving that the debtor is actually financially unable to pay its debts. That’s often not easy, and mere failure by the debtor to pay the debt is not sufficient.
The “section 345 demand” shortcut
However there is a shortcut – serve on the company’s registered office a demand for the debt. You may hear it referred to as a “section 345 letter”, that being the section of the Companies Act which makes this all possible. If the debt is not paid (or secured or resolved by agreement) within three weeks, the company is deemed to be unable to pay its debts, making a liquidation application much easier to support. The 2021 High Court case of a municipality struggling to recover debts due to it by two property companies provides a good example of this letter of demand process in action…
Letters of demand sink two property companies
  • Two related companies, one a property-owner and the other a tenant, owed the local municipality for unpaid rates, service charges, and electricity accounts.
  • The municipality served the appropriate letters of demand on the companies’ registered offices, but still they failed to pay up. Their attempts to settle with the municipality having failed, the municipality applied to the High Court for liquidation.
  • The High Court duly granted provisional liquidation orders against both companies, finding on the facts that they had failed to rebut the presumption that they were unable to pay the debts. Nor were they able to convince the Court to exercise its discretion to refuse the liquidation orders.
As an end note, it is essential that your letter of demand is correctly drawn and correctly served.  If it isn’t, your application is headed for failure – and that can be a very expensive exercise. 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

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.


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.


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.

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Mystery Africrypt investor wants Cajee charges dropped

By | Information Technology Law / Cyberlaw, Insolvency / Liquidation, News

A group of Africrypt investors, who lost millions following an alleged hack of the crypto platform earlier this year, say they will only accept an offer from a mystery investor to inject $5 million (R76 million) in the firm if the investor agrees to certain conditions.

This, despite investors with the majority of claims against the platform having voted unconditionally in favour of the offer, following a six-hour virtual meeting on Friday.

The mystery investor, who has not revealed identification details, has offered to put in the money for a 51% stake in the company and in so doing, take it out of liquidation, on condition that criminal charges against the platform’s founders Raees and Ameer Cajee are dropped.

The brothers have been in hiding since informing investors in April that the platform had been hacked.

The liquidators’ attorney, Ruann Kruger, confirmed in an e-mailed letter to creditors today that those investors representing 69% of the total ascertainable claims at the time voted in favour of the offer unconditionally.

However, creditors who made up 21% of claims voted in favour of the compromise subject to the implementation of additional terms and conditions that were put to the provisional liquidators during the meeting. The remaining 10% of the creditors rejected the offer.

To enable the provisional liquidators to properly verify each claim, creditors have been asked to provide full details and proof of each claim by Friday.

Attorney Darren Hanekom, who is representing a number of creditors, says the additional terms and conditions include that the settlement is no longer conditional on the investors withdrawing their criminal cases.

Hanekom says further protection mechanisms were also put in place regarding the mystery investor’s contractual obligations to the business.

“We await confirmation as to whether the amendment version has been accepted; thereafter, it will need to be made an order of court.”

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Africrypt rescue plan could see Cajee brothers avoid prosecution

By | Information Technology Law / Cyberlaw, Insolvency / Liquidation

In what has been described as a “get out of jail free” card for the Cajee brothers, the liquidators for failed crypto scheme Africrypt say an unnamed investor has proposed stumping up US$5-million (about R77-million) for a 51% stake in the company – provided all criminal proceedings against the Cajees are dropped.

Creditors get to vote on the compromise offer on Friday, 12 November.

One creditor, who asked not to be named, described it as an “audacious” offer.

As Moneyweb previously reported, Raees and Ameer Cajee, have a history of ‘hacks’ against their various crypto schemes, the first being in May 2019 and then again earlier this year when an amount of about R200-million was allegedly hacked and spirited away.

Though the Cajees have stuck to the hack story, forensic investigators are less sure.

The compromise offer presented to creditors proposes paying $4-million (R61.6-million) towards the payment of creditor’s claims, which are reckoned to amount to about R200-million, and a further $1-million (R15.4-million) as capital for purposes of continuing the business.

The unnamed investor willing to inject $5-million into the business will receive 51% of the shares in Africrypt, with the balance of shares going to creditors pro rata to the balance of their claims.

The proposal also calls for the hiring of the two Cajee brothers by the company. In addition, it calls for one of the liquidators, Eugene Januarie, is to be appointed to the board, alongside an appointee representing the investor.


One of the conditions of the offer is that any criminal charges laid by creditors against the Cajees be dropped, and that they agree to alternative dispute resolution instead.

Ruann Kruger, legal representative for the liquidators, said he did not want to comment on the compromise offer ahead of the Friday meeting with creditors.

One creditor, who asked not to be named, described the offer as “preposterous”.

“It’s a ‘get out of jail free card’ for the Cajees. Who would invest in a business like this as if it had any credibility or chance of success, other than someone very close to the Cajee family?”

There is still no certainty as to the value of claims against Africrypt, and the figure of R200-million given by the liquidators represents the deposit amounts, not the subsequent value of the cryptos deposited.

Bitcoin is up roughly 200% over the last year, and ethereum more than 1 000%. It means investors in Africrypt – who were being offered 10% a month – have potentially lost hundreds of millions of rands.

The offer requires 75% support from creditors to be accepted, at which point it will be made an order of court.

Another creditor said the offer is likely to be accepted by 75% of creditors, as the alternative is to receive nothing.

This proposed compromise certainly comes at a convenient time considering the current prices of bitcoin and ethereum

While creditors will sign away their rights to pursue criminal charges against the Cajees if they vote in favour of the offer, law enforcement authorities and ordinary citizens may take a different view.

The Cajees were living the high life prior to the collapse of their companies and, despite being in their early 20s, appeared to have enough money to purchase several luxury cars and houses – and then boast about it on social media.

“This proposed compromise certainly comes at a convenient time considering the current prices of bitcoin and ethereum,” says attorney Darren Hanekom, who is representing a number of creditors. “We trust that the general body of creditors will make the right decision when the proposal is tabled for a vote.”


Article by: Moneyweb

Africrypt liquidators granted additional powers to track down missing funds

By | Insolvency / Liquidation

The Gauteng High Court last week granted the liquidators of Africrypt additional powers to track down missing funds, and to sell assets and property belonging to the company.

Africrypt, a crypto investment scheme headed by Raees and Ameer Cajee, was supposedly hacked in April 2021 and its digital wallets emptied of more than R40 billion in bitcoin. Forensic investigator Hamilton Cheong and Darren Hanekom, the attorney representing some Africrypt clients, have raised doubts as to whether it was a hack, given the fact that funds were depleted from Africrypt-controlled wallets months earlier.

The Cajees fled South Africa after the alleged hack, claiming they feared for their lives after receiving death threats. Raees Cajee emerged from hiding in Tanzania last month to depose an affidavit opposing the final liquidation of the company, arguing that the alleged hack originated out of a Ukrainian IP (internet protocol) address, and that investors had no claim against the company and “it is in the nature of investments that they can be lost.”

A statement issued last week by the liquidators’ legal representative, Ruann Kruger, says the business model of Africrypt “required investors to deposit fiat currency with Africrypt, who used the fiat currency to purchase crypto assets on a number of asset exchanges, and promised investors exorbitant returns of up to 10 % per day on their investments.


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“There is no evidence that this was indeed a hack of the Africrypt systems, and in support thereof, it seems that funds were depleted from the Africrypt wallets four months before the alleged hack.”

Africrypt was placed in provisional liquidation on April 26, 2021 after investor group Badaspex launched a liquidation application and obtained a provisional order.

The court-appointed liquidators – Eugene Januarie and Welcome Jacobs – say directors of Africrypt intentionally failed to co-operate and are deliberately hampering the investigations into the affairs of the company. An enquiry into the whereabouts of the assets must now be held to ascertain what happened to the funds and to determine what can be recovered.

“There exists a high probability that assets and funds were moved from the business of Africrypt into the names of the directors, related companies, and close corporations to the detriment of creditors and requires urgent investigation,” says the statement.

“The so-called breach occurred on April 12, 2021, causing a loss of approximately R84 million, although an amount of R200 million had been received and invested on behalf of investors.”

This raises questions as to the status of the remaining R116 million (being the difference between the claims of R200 million received and the reported loss of about R84 million), and whether this includes gains and losses from investment, as well as withdrawals.

The liquidators also want to know why no communication has been issued by Recreate Wealth (Pty) Ltd or ReaCreate Wealth Limited, the two Hong Kong-based companies that were the legal entity that contracted with Africrypt clients.

“With the liquidator’s extended powers, they will be able to investigate and interrogate the relevant parties, directors, and their related companies during the enquiry to uncover the mystery behind this ostensible ‘Bitcoin heist’”.

“The liquidator’s main objective is to track down assets, attempt to gain access to Africrypt systems and their source codes to recover Bitcoin wallets and funds invested and lost by investors.

“In this endeavour, the liquidators have further secured the services of Mahier Tayob of Tayfin Forensic Investigative Auditors to conduct forensic investigations into the affairs of Africrypt and related entities.”

Article by:

What happened to Africrypt billions? Liquidators get green light to probe witnesses

By | Insolvency / Liquidation
  • The provisional liquidators of cryptocurrency investment company Africrypt have been granted leave to conduct a confidential commission of inquiry.
  • Africrypt collapsed in April after announcing it had been hacked. Its founders then disappeared. 
  • During the inquiry, a commissioner will be able to summons witnesses, will have to give evidence under oath.  

The provisional liquidators of Africrypt have been granted leave to conduct a closed-doors commission of inquiry into the cryptocurrency investment site.

Africrypt was placed into provisional liquidation in April after its announcing its systems had been “hacked”. Its founders, siblings Ameer and Raees Cajee, disappeared.

Before its collapse, its website boasted of using an “artificial intelligence-driven trading platform” to invest over $100 million.

The brothers, who may now be in Tanzania, have denied any wrongdoing. Estimates of losses to investors range form a few million to over R50 billion.

The order to set up the inquiry was granted in the North Gauteng High Court in Pretoria earlier in the week.

It allows provisional liquidators Eugene January and Welcome Norman Jacobs to conduct a commission of inquiry into the affairs of the crypto company. The commission will enable them to probe witnesses under oath about what happened to the site’s investments.

Magistrate Petro Engelbrecht has been appointed commissioner with the power to issue summons.

The evidence form the inquiry will be confidential, but may come to light when a final liquidation application is heard.

Article  by: News 24