Swindled, scammed, defrauded –like it or not, many of us have fallen prey to some form of scam, whether through email phishing or credit card fraud. We take a look at three bogus investment schemes which fleeced some South Africans of their savings.

Nelson Mandela R5 Coins

To celebrate the late former president’s 90th birthday, in 2008, the South African Mint made special commemorative R5 coins bearing Nelson Mandela’s image Many South Africans paid tens of thousands of rands for these “proof” coins after private company SA Coin, marketing itself as South Africa’s largest rare coin dealer, claimed these coins would increase in value. Coin collectors searched for proof coins because of their near-perfect quality and rarity as usually only 5 000 are minted.

Which scams have done the rounds and how can we avoid them?

The highest grade for a perfect proof coin is a rating of 70. According to SA Coin spokesperson, Eion Blignaut, only 795 proof coins had been graded at 69. However, three recognised coin graders – the Numismatic Guaranty Corporation, Professional Coin Grading Service  and the American Numismatic Association Certification Service - revealed that 1 948 proof coins had achieved this grading.

Furthermore, Telana Coetzee, the PR of Numismatics of SA Mint confirmed that two types of Nelson Mandela R5 coins were made. Top businesspeople, coin collectors and SA Mint’s elite clientele received 5 000 proof coins with a bi-metal medallion.

Over and above the 5 000 proof coins, another 14 000 coins were released as a commemorative set, which are easily identifiable by the fact that Nelson Mandela’s image on them is frosted. These coins are have been classified as proofs by coin graders. Thus, in total, 19 000 coins were released, which meant the R5 coins were not as rare or as valuable as SA Coin would have led many to believe.

Kipi Scheme

A self-styled stokvel, the Kipi scheme offered an investment product called Dreams to members of a five-tier network marketing business which operates nationally online, boasting that If members invested a mere R500, they would achieve a R10 000 return within 12 to 16 months - a claim that seemed – and was -- too good to be true.

Payments would be created by other members joining Kipi Investments. The Kipi website explained:“you can earn money just by using the stand-alone investment product and earn daily interest from the money you’ve invested. The second part is the multi-level marketing business opportunity programme that allows you to earn additional money by referring people into the business.”

In May 2015, the Financial Services Board  referred Kipi Investments, also known as Kipi Investment Dreams and MyDeposit247 Community, to the Reserve Bank for investigation who forwarded the matter to the National Consumer Commission. After having received queries as to whether Kipi was registered as a financial services provider (FSP), the FSB released a statement saying, "The FSB has no record of the scheme’s registration as an FSP, and its business dealings or those of Mydeposit247 do not fall within the jurisdiction of the institution.”

Due to Kipi’s strong resemblance to a Ponzi scheme, investors have strongly cautioned against signing up with Kipi Investment. A Ponzi scheme typically raises no wealth but shifts existing funds between members.

Belvedere Management

United States-based company OffshoreAlert.com uncovered a scam with South African businessman Cobus Kellerman atits epicentre in May 2015. Kellerman, who was living in Mauritius at the time, and his Irish partner David Cosgrove headed up Belvedere Management, an offshore fund group responsible for more than R200-billion worth of assets. Comprising several smaller companies, the group also handled eight South African unit trusts worth R1.35-billion.

OffshoreAlert.com claimed Kellerman had devised a global Ponzi scheme which meant that South Africans who had invested with him would lose billions. Funds invested with Belvedere were siphoned into a collection of offshore companies and evidence showed that not only was Belvedere entangled in a $130-million Ponzi scheme operating in Cayman, but also in a United Kingdom Ponzi scheme to the value of £100-million. Kellerman and Cosgrove also fabricated asset values in order to show boosted capital growth.

David Marchant, OffshoreAlert.com’s founder said that Belvedere Management was considered one of the biggest global Ponzi scams. He added: “There’s probably never been a fraud like this in the history of finance, just in terms of the complexity, the number of investors, the number of jurisdictions involved, and the number of shell companies involved. It is truly staggering.”

The Mauritian Financial Services Commission instructed Belvedere to stop accepting deposits and stakeholders were informed of an investigation into the company. UK authorities also began to probe the scheme.

Tips to Avoid Falling Prey to Scams:

  • Be cautious of investments which promise high returns or quick profits with little or no risk.
  • You should not have to pay a fee in order to participate in an investment scheme.
  • Any scheme that insists it is not a Ponzi or pyramid scheme yet recruits new people to earn money, normally is a Ponzi scheme.
  • If the “investor” is employing hard-sell tactics and becomes forceful or pushy, you should have the freedom to investigate all that the investment has to offer at your leisure.
  • Check your facts: Is this company registered with the Financial Services Board or are they on the FSB’s fraudulent companies alert list? Visit www.fsb.co.za for more information.

Concerned about a potentially fraudulent scheme? Contact the FSB’s Anonymous Fraud and Ethics Tip Off Hotline on 0800 31 36 26 or email fsb@whistleblowing.co.za.