Forensic audit traces Classic Financial Services’ missing millions

A forensic auditor is finalising an analysis that will provide investors in the Classic Financial Services Ponzi scheme with a clearer picture of fund inflows and outflows, and how director Cobus Geldenhuis used the money.

Geldenhuis was debarred from providing financial services or offering advice in 2009 because of dishonesty. Despite this, it appears he carried on with his business through Classic.

According to an FSCA report published on 22 May last year, Classic received R617 346 972.53 from more than 1 000 investors from January 2019 to May 2023. During the investigation, Geldenhuis acknowledged that the purpose of the business was to steal money. He also admitted that he had not invested clients’ funds since Classic’s inception in 2011. Instead, of the monies received, R454 814 600.61 was paid to previous investors.

An amount of R129 962 413.37 remains unaccounted for.

A few days after the release of the FSCA’s report, Classic was liquidated by order of the High Court in Pretoria. Jacques Fisher of Van Rooyen Fisher Trustees, Sandra McKenzie of SJ McKenzie, and Jaco Venter of PBP Administrators were appointed as the joint liquidators of the insolvent estate.

According to Jacques van Heerden, an attorney representing the joint liquidators, a forensic auditor was appointed to analyse investments going back to 2011.

The initial forensic investigations found that Classic held three bank accounts at separate financial institutions: Absa, Nedbank, and First National Bank (FNB). Some funds were also channelled through Geldenhuis’s personal account.

The forensic auditor was tasked with examining the investors’ names, investment amounts and dates, and payouts financed by new investors across these multiple accounts.

According to Van Heerden, the analysis was delayed because three months of Nedbank statements were initially missing from the subpoena duces tecum process.

He explained that these missing statements were crucial to ensure the analysis was accurate. If creditors invested or were repaid during these months, they could unfairly benefit or be discriminated against during the claims process.

“If some people were paid during these months, and we now institute a proceeding against them, we would have claimed for a lesser amount than what they’ve received, so it’s very important,” Van Heerden said.

He said the statements have now been provided, and the analysis is close to being finalised.

Applications for sequestration

To date, the joint liquidators have successfully applied to sequestrate Geldenhuis’s personal estate, as well as that of his former wife, Jackie, and of his son, Dewald.

Read: Classic Financial Services director and wife’s R66m gambling spree

Van Heerden said the joint liquidators repossessed Geldenhuis’s residence and sold it at auction.

“We have repossessed all movable assets belonging to Cobus Geldenhuis, and the joint liquidators have taken control of Jackie Geldenhuis’s movable assets as well,” he said.

In addition, an interim sequestration order has been granted against Tony Visser, an associate of Geldenhuis and the director of Summit Renewables. As reflected in the sequestration application, Visser was the recipient of a R19-million loan.

Van Heerden said Visser is in negotiations with the joint liquidators to repay some of the money received to avoid final sequestration.

The return court date for the sequestration application is set for 29 July.

Preserved funds

The sequestration application for Jackie’s estate included a founding affidavit from Fisher, dated February 13, detailing preserved funds of about R21m.

According to the affidavit, the National Prosecuting Authority (NPA) on 25 October 2022 obtained a preservation order in the High to preserve:

• R399 198.88 together with interest thereon in an Absa account held in the name of Classic;
• R10 395 192.44 together with interest thereon in a Nedbank held in the name of Classic;
• R3m together with interest thereon in an FNB account number in the name of Jackie Geldenhuis; and
• R5 750 000 together with interest thereon in a Nedbank account in the name of Murry Pierce Kilgour.

A second preservation order was obtained for R1 646 883.96 together with interest thereon in an FNB account in the name of Classic.

The NPA, in the case of both these preservation orders, intended to apply for a forfeiture order. However, Fisher stated that, at this stage, “as a general proposition”, the joint liquidators and the NPA have agreed that the funds are to be transferred to the joint liquidators.

‘Numerous assets’ collected

In a letter sent to creditors in October last year, the joint liquidators informed “all affected parties” that the liquidators have started the section 417 inquiries and are investigating various role-players associated with the insolvent estate.

Section 417 of the Companies Act provides that in any winding-up of a company unable to pay its debts, the Master or the Court may, at any time after a winding-up order has been made, convene an inquiry to obtain information concerning the trade, dealings, affairs, or property of the company.

In the letter, Venter stated that, through the provisions of the section 417 inquiries, the liquidators had collected “numerous assets” that had been “dissipated by virtue of impeachable transactions out of the insolvent estate and were successfully recovered to the benefit of the general body of creditors”.

Read: Inquiries into insolvent classic financial services unearth assets

Van Heerden said a final count of creditor claims cannot yet be provided because new claims are being filed daily.

He also said it was difficult for the joint liquidators to itemise the assets totally and correctly because they “are distributed all over and in various accounts”.

Business as usual for Geldenhuis

Geldenhuis was hit with an administrative penalty of R143m and a 20-year debarment by the FSCA late last year for, among other reasons, rendering unauthorised financial services.

The FSCA found that Geldenhuis and Classic violated section 7(1) of the FAIS Act and breached section 11 of the Banks Act by acting as a bank.

Read: FSCA imposes R143m penalty on Classic Financial Services Director, creditors unaffected

In a media statement released in early March, the Authority said it had come to its attention that despite Geldenhuis’s debarment, he was rendering financial services to the public.

“Mr Geldenhuis now appears to be conducting business under the name Pecunia Systems (Pty) Ltd (Pecunia) with FSP number 11332,” the FSCA said.

Read: It’s ‘business as usual’ for debarred director of Classic Financial Services

This is the same licence Geldenhuis used to portray Classic as a registered financial services provider before the scheme was exposed.

According to Fisher’s affidavit, Classic used Pecunia’s FSCA licence number to further “its unlawful fraudulent Ponzi scheme and to solicit large funds from the general public as purported investments”.

Pecunia provides financial advice and financial services to the public. At the time of the investigation, it was registered as such with the FSCA.

Geldenhuis’s son, Dewald, is Pecunia’s sole director and shareholder. He claims the licence was used without his knowledge.

In Dewald’s sequestration application, he stated in his opposing affidavit that around 2019, his father fraudulently used Pecunia’s licence. He said that, upon discovering this, he promptly issued his father with a cease-and-desist order.

He also noted that it recently came to his knowledge that his father had again started to attempt to solicit unsuspecting third parties to make investments with Geldenhuis using the company name and licence of Pecunia.

“Once I became aware of this, I immediately arranged a meeting with the FSCA and reported the conduct of Cobus and requested the immediate termination of Pecunia Systems (Pty) Ltd’s financial services licence in order to possibly stop Cobus from continuing with his fraudulent action,” the affidavit reads.

Dewald added that he had decided to lapse Pecunia’s FSP licence because “I no longer intend to be involved in the financial sector”.

According to the FSCA’s report, neither Dewald nor Pecunia had any business relationship with Classic, and none of Classic’s investors implicated them.