FSCA imposes R143m penalty on Classic Financial Services director, creditors unaffected

The FSCA administrative penalty of R143m imposed on Jacobus Stephanus Geldenhuis, director of Classic Financial Services One (Pty) Ltd, will not affect creditors’ claims on the company’s insolvent estate.

According to Jacques van Heerden, an attorney acting on behalf of liquidators PBP Administrators, Classic has not been named as a respondent, or a defendant in any of the FSCA’s reports thus far. Nor, he says, has a penalty order been issued against Classic’s insolvent estate.

A letter sent to affected parties by PBP Administrators on 22 December, confirmed that the FSCA had decided not to impose a penalty on Classic. In the letter, PBP curator Jaco Venter stated that the liquidators and their legal representatives addressed several correspondences to the FSCA with reasons not to impose a penalty on Classic.

Venter said the liquidators viewed the FSCA’s decision not to impose the fine on the company “as a positive outcome as it is (to) the benefit of the general body of creditors”.

The FSCA imposed the hefty administrative penalty, as well as a debarment order, on Geldenhuis on 12 December last year.

Van Heerden clarified that the fine on Geldenhuis was issued in his personal capacity, meaning that the FSCA penalty could not be recovered from Classic’s insolvent estate or any assets reclaimed during the administration process.

The penalty is payable within 30 days of the date of the order. Should Geldenhuis fail to pay the administrative penalty within this time, interest will be payable in respect of any unpaid portion of the administrative penalty until it is fully paid.

As set out in the penalty order, failure to comply will also give the FSCA the right to file a certified copy of the order with the registrar of a competent court. Once filed, the order has the effect of a civil judgment, and may be enforced as if lawfully given in that court. The debarment order prohibits Geldenhuis from providing, or being involved in the provision of financial services; and acting as a key person of any financial institution for 20 years.

Ponzi scheme

The penalty and debarment orders follow the FSCA’s investigation into Classic and Geldenhuis. According to the Authority, the investigation – which covered the period 1 January 2019 to 12 May 2023 – arose after it received a complaint that Geldenhuis (who had been debarred from selling financial services or acting as an adviser in 2009 for dishonesty) was offering to invest in shares on behalf of clients.

In October 2022, the FSCA conducted a search-and-seizure operation at Classic’s Kempton Park premises. One month later, the Authority warned the public “to act with caution” when conducting any financial services-related business with Classic and Geldenhuis.

In July last year, the Enforcement Division of the FSCA shared that it had concluded its investigation into Classic “and several people” and was in the process of taking enforcement action against the investigated parties.

A media statement released by the FSCA last month stated it had been found that Geldenhuis and Classic contravened section 7(1) of the Financial Advisory and Intermediary Services Act No 37 of 2002 and conducted the business of a bank in contravention of section 11 of the Banks Act No. 94 of 1990.

“Neither Classic Financial Services nor Mr Geldenhuis is an authorised FSP or a representative of an authorised FSP. During the investigation, it was established that Mr Geldenhuis did not invest client funds in shares but was running a Ponzi scheme and used client funds for his own benefit,” the FSCA stated.

The Authority added that it had brought this matter to the attention of the criminal authorities.

Although, the National Prosecuting Authority (NPA) confirmed in July last year that the Germiston Commercial Crimes Unit was investigating the dealings of Classic and Geldenhuis, no details about the progress of the investigation have been shared with the media since.

Read: Criminal investigation into Classic Financial Services and its director gets under way

Moonstone contacted the crimes unit last month, requesting an update, but so far no feedback has been received.

Millions lost

According to the FSCA, Classic had more than 1 000 clients.

Although it has not yet been shared exactly how much money moved through Classic since it was incorporated in 2004, bank records procured by the FSCA showed that from 1 January 2019 to 31 August 2022, R412 419 440 and R83 513 962, respectively, had been paid into accounts created “for the deposit of investment funds”.

When the NPA’s Asset Forfeiture Unit (AFU) successfully applied for preservation orders regarding funds in these two accounts in May last year, all that remained was about R19.5 million.

Read:Investors who lost money with Classic Financial Services One urged to lodge claims

Classic was wound up (liquidated) by order of the High Court in Pretoria later that same month. The liquidators have since shared that numerous assets that had been “dissipated by virtue of impeachable transactions out of the insolvent estate” had been successfully recovered.

Read:Inquiries into insolvent Classic Financial Services unearth assets

In the latest letter sent to affected parties, PBP stated that the liquidators would convene the second meeting of creditors early this year. Creditors were advised that all original claim forms with the supporting documents should be delivered no later than 1 February to their reception at Corobay Corner, Block A, 169 Corobay Avenue, Menlyn Maine, Pretoria.

“We again confirm there is currently no risk of a contribution being levied on creditors, and all creditors are advised to complete the required claim form accordingly,” said Venter.

Those who require assistance can contact Venter on 082 715 3629 or jaco@pbpadmin.co.za.