Mfundo Manci faced justice in the Durban Specialised Commercial Crimes Court this week when he was sentenced to an effective 10 years’ imprisonment for orchestrating a Ponzi scheme whose participants lost millions of rands.
Crypto Mzansi Group (Pty) Ltd solicited money mainly via social media and targeted people in the Durban area. Investors were promised abnormally large returns, often in excess of 1 000%.
The 33-year-old Manci admitted guilt under a plea and sentence agreement for offences committed from June 2020 to April 2021, including fraud, contravention of the Banks Act, contravention of the Financial Advisory and Intermediary Services Act, and violations of the Prevention of Organised Crime Act (POCA).
Manci received a 15-year term of imprisonment, with five years suspended provided he is not convicted of fraud or theft during the suspension period. Concurrently, he was sentenced to five years each for violating the Banks Act and the FAIS Act, and 10 years for violating POCA. Effectively, Manci will serve 10 years in prison.
Natasha Ramkisson-Kara, the National Prosecuting Authority’s spokesperson for KwaZulu-Natal, said Manci operated an online trading platform that initially engaged in legitimate cryptocurrency transactions. Later, he devised an investment scheme promising substantial returns, leveraging two associates to recruit investors. The investors were enticed with commissions for referrals, but Manci misappropriated their funds, using new investments to pay returns to earlier investors.
“Manci also recruited some investors who communicated with him directly. While some investors did receive their investments with profits, they were paid with other investors’ money. Manci was not investing the monies received and only traded for himself,” said Ramkisson-Kara.
The scheme unravelled when Manci disappeared during a business trip to Cape Town, prompting concerns from his family and the filing of criminal cases by investors who had not received returns.
In August 2022, the NPA’s Asset Forfeiture Unit (AFU) secured a court order to freeze R4 547 820.47 in Manci’s and Crypto Mzansi Group’s bank accounts.
“Realising that his funds were dried up and that his accounts were frozen, Manci handed himself over to the authorities in Cape Town and the case was then transferred to Durban,” said Ramkisson-Kara.
In March 2023, the frozen R4.5m was forfeited to the state in terms of a court order.
Applications to change the forfeiture order
Last year, five participants in the scheme brought applications before the High Court in Durban seeking to change the forfeiture order, to exclude the money they paid to Crypto Mzansi Group.
They applicants submitted they believed the scheme was above board and lawful, and therefore they should not be prejudiced by the forfeiture order. Furthermore, they were not criminals, and no charges were pending against them.
One of the applicants invested money she received from a personal injury pay-out in respect of her child. According to her responding affidavit, she believed Manci and his associate’s assurances that the scheme was legitimate, despite the returns being offered.
She invested R20 000 on 4 February 2021 and received R30 000 as a return six weeks later. Convinced of the scheme’s legitimacy, she invested R100 000 on 8 March 2021 and another R40 000 a week later. But the promised pay-outs of R200 000 by the end of April and R1.2m by the end of December 2021 never materialised.
In a judgment handed down in September 2024, the High Court rejected the applications.
The court noted there was a dispute of fact as to whether the applicants knew that the scheme was unlawful. This factual dispute was apparent when the parties exchanged their original affidavits. Despite this, the applicants chose to proceed by way of motion proceedings, whereas it ought to have been clear to them and their legal representatives that a dispute of fact was bound to emerge, which a court would not be able to decide in their favour merely on the papers. The applicants must “endure the consequences of that decision”.
The NPA argued the applicants in all likelihood knew or ought to have known that Crypto Mzansi Group was an illegal multiplication scheme, considering the returns promised.
Although the applicants averred that they were victims, none of them, in their affidavits, addressed the lucrative interest rates being offered.
According to the judgment, the scheme promised that a “short-term investment” made by 15 March 2021 would yield a 100% return by 31 April 2021 (the court noted there are only 30 days in April). A so-called long-term investment of nine months promised to transform an investment of R10 000 into R300 000 – a return of almost 3 000%.
It is an offence merely to participate in a criminal multiplication scheme, and the money the applicants invested was an instrumentality of the offence committed by Manci.
“It was not necessary that the applicants be criminally charged. Forfeiture is not founded on the basis of a conviction or even of a charge being preferred in a criminal trial; it suffices that the funds were an instrumentality of the crime […] A clear crime has been committed. The applicants got involved in a scheme with quite astronomical rates of interest promised. The common cause facts do not suggest that they were unaware that the scheme was illegal,” the court said.
“The frozen R4.5m was forfeited to the state in terms of a court order”. So what happens to this money? It gets taken by a government department and then squandered or stolen. Does this not make the AFU just as corrupt as the perpetrator? Surely, some of this money must be paid to the ‘investors’. I assume they are not very financially literate so they cant be blamed for trying to make the most of what little they have.
The money was transferred to the Criminal Asset Recovery Account held with the South African Reserve Bank.
In my view, South Africa needs a compensation fund for victims of financial crime. Instead of fines being paid to the National Revenue Fund, they should go into a compensation fund – along with assets seized from criminal activities.