The new leadership of troubled private equity investment group Ecsponent Limited has instituted another independent forensic investigation into suspected misappropriation of investments dating back to 2018. It is, however, yet to name any former or current company individuals that are implicated.
Ecsponent announced in a JSE Sens statement on Tuesday that the latest probe relates to the group’s R100 million investment in VSS Financial Services, a wholly owned subsidiary of Frankfurt-listed fintech MyBucks SÀ.
This is the second forensic probe Ecsponent has announced publicly since the beginning of September, which means that the group is investigating more than R220 million in questionable transactions. Both probes are effectively linked to MyBucks, a group it originally loaned start-up capital to, but was forced the convert its loans into equity last year.
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“The board of directors of the company wishes to advise shareholders that it instituted an internal investigation regarding the company’s R100 million investment in the form of redeemable preference shares in VSS Financial Services Proprietary Limited … Details of the terms of the preference shares and the investment opportunity were announced on January 3, 2018 on Sens,” Ecsponent noted in its latest Sens statement.
“Stakeholders are now advised that the board, after completion of the internal investigation, decided to institute an independent forensic investigation into possible misrepresentation on the merits and purpose of the investment at the time of the initial investment proposal, which may have ultimately resulted in financial loss to the company,” it said.
Ecsponent added that based on the recommendations from forensic investigators and the group’s external legal counsel, it has instituted legal action “against certain parties whom the company believes are potentially liable to Ecsponent for actions taken by them that have resulted in possible losses to the company”.
The group has seen a rash of resignations from its board and at executive level over the last year, as it hit financial troubles and defaulted on paying out disbursements to preference shareholders.
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Zimbabwean businessman George Manyere, who took over as CEO of Ecsponent at the start of 2020, has since sought to turn around and clean-up the group.
“As a new board and management team, we promised shareholders that we will leave no stone unturned to find out if, where and how investments were misappropriated,” Manyere said in an emailed statement to Moneyweb on Tuesday.
He noted that Ecsponent’s new board had also informed the Mybucks board of the investigation and planned legal action “into the past activities, governance and use of funds that were in VSS [which] will be conducted from their end”.
Meanwhile, Ecsponent reminded shareholders in its JSE Sens statement that the company’s claim against VSS for the preference share investment was settled in full by MyBucks through the issue of MyBucks shares to the company.
This formed part of the debt restructuring and MyBucks share acquisition transaction, which was approved by Ecsponent shareholders on November 20, 2019.
Ecsponent is yet to reveal any of the “parties” that are potentially liable to the company in neither the VSS investigation nor the forensic probe (announced last week) into a Mauritian-based company related to a $7.5 million [around R125.2 million] loan. However, this is likely due to Ecsponent awaiting possible charges to be laid and the matter to reach the courts.
In its statement to Moneyweb, Ecsponent noted that the$7.5 million loan was originally earmarked to grow Ecsponent’s loan books in Botswana and Zambia.