Banxso has come out swinging following an FSCA warning that scammers are targeting investors who lost money on the online trading platform. The focus of its ire? The FSCA and Mostert & Bosman, the law firm handling a liquidation application against Banxso.
Under scrutiny for nearly a year, Banxso has denied involvement in deceptive deepfake ads featuring prominent individuals such as Elon Musk and Johann Rupert. Linked to Immediate Matrix, these ads promised unrealistic returns, leading to investor losses.
Read: Banxso v FSCA over links to deepfake adverts
The FSCA began investigating Banxso in March last year for suspected regulatory breaches. In October, Banxso’s financial service provider licence was provisionally withdrawn because of concerns over client safety. The FSCA’s findings were shared with the Financial Intelligence Centre and the National Prosecuting Authority.
Banxso’s bank accounts were frozen on 2 October under the Financial Intelligence Centre Act over suspected illicit activity. A preservation order under the Prevention of Organised Crime Act followed but was overturned on 9 November.
Banxso’s accounts remain frozen, except for FSCA-approved transfers to authorised providers.
The liquidation application, initially filed in October, was postponed to March this year, with a court order ensuring the preservation of Banxso’s funds until the hearing.
On 15 January, the FSCA issued a public warning about individuals and entities claiming to assist investors in recovering losses from Banxso. Posing as investigators, they claim to have located funds belonging to Banxso investors, which they promised to recover for a fee.
Read: Scammers target Banxso investors with fake fund recovery schemes
In a statement released the following day, Banxso expressed frustration with claims by “certain media outlets” that the personal information used by the scammers could have come from either a system breach at Banxso or its co-operation.
Describing this conclusion as “a concerning leap of logic that overlooks more plausible explanations”, Banxso denied any data breach or sharing of client information.
Banxso criticised the FSCA, claiming the regulator failed to contact the company before issuing its warning. The company stated it expected to be the first point of contact regarding system or client security concerns but instead learned of the allegations through the FSCA’s website and the media.
The company pointed to Mostert & Bosman’s “unsecured website collecting sensitive client information for potential liquidators” as a more likely source of the data breach. The website was launched after the law firm applied to the High Court to place Banxso under provisional liquidation.
Mostert & Bosman represents 12 investors in the liquidation application, who claim combined losses exceeding R68 million.
The online platform also accused the FSCA and the law firm of “blocking clients’ access to their own money” and prolonging proceedings for financial gain, highlighting its directors’ offer to place more than R57m in an attorney’s trust account to settle claims. Mostert & Bosman rejected the offer.
Banxso stated that this guarantee would have ensured repayment to the applicants upon their undertaking to withdraw the application and prove their claim.
Banxso has also accused the law firm of having a “financial motivation” behind its pursuit of the provisional liquidation application, noting that Mostert & Bosman previously served as legal counsel for Mirror Trading International (MTI) during its liquidation, earning the firm a significant sum.
MTI, an online cryptocurrency trading platform based in Stellenbosch, launched in April 2019. The platform attracted investments from about 300 000 members across 200 countries, promising high returns while handling approximately $1.7 billion (R32bn) in funds. The platform collapsed, halting member payments. MTI was placed under provisional liquidation on 29 December 2020, with a final order granted on 30 June 2021.
Mostert & Bosman fired back, rubbishing claims of a possible data breach involving its website. The law firm asserted that no user data is stored on the website in question and, therefore, cannot be accessed or “harvested”.
The law firm also defended the professional ties among parties involved in the MTI liquidation, noting their history of successful collaborations, including the high-profile insolvency of MTI. It emphasised that all fees earned in such matters are either based on statutory tariffs or agreed-upon terms in service level agreements, monitored by the Master of the High Court. According to Mostert & Bosman, the fees in the MTI case reflect years of work and necessary disbursements such as salaries and legal costs.
Explaining why Banxso’s accounts must remain frozen until the provisional liquidation hearing, the law firm raised concerns over the misappropriation of funds. It alleged that about R1bn of clients’ funds had been diverted to Banxso’s liquidity provider, with further unexplained transfers to third-party accounts following the withdrawal of Banxso’s FSP licence.
Regarding Banxso’s R57m security offer, Mostert & Bosman argued it offers little benefit to the affected clients, who would still have to undertake lengthy and costly court battles to claim their funds.
The firm further noted that the security is provided not by Banxso itself but by its liquidity provider, which shares the same director and shareholder. Mostert & Bosman warned that in the event of Banxso’s liquidation by another creditor, this arrangement could leave clients unable to recover their losses, because the security funds could be treated as a voidable preference.
With Banxso’s recent statement and the law firm’s response, the dispute has been thrust into the court of public opinion. However, the ultimate decision rests in the hands of the court, which will determine the way forward at the provisional liquidation hearing on 17 March.
