The liquidators of Imagina FX, the failed investment company that was placed in final liquidation in November 2020, have trained their sights on the founder and chief operator, Craig Massyn.
Application has been made in the Cape High Court for the sequestration of Massyn and his wife Mara-Lee based on two claims of R9.1 million and R5.7 million owing to two companies formerly under his control: Imagina FX and Octox.
The liquidators claim that the Massyns are insolvent and are unable to pay their debts. Massyn is opposing the application, claiming it is an abuse of the court process, and that he is not insolvent, but his court filings offer no indication as to what happened to the estimated R2 billion the liquidators claim is owed to investors.
Moneyweb previously reported on the failed investment scheme, which traded under a variety of names, including Imagina FX, Praesidium and Octox.
According to the liquidators, the companies managed to attract more than R2 billion from investors by apparently showing annual returns of 43.5% and even as high as 74.3% in one year.
All this was nothing more than a Ponzi scheme, say the liquidators, with newer investors’ funds being used to pay older ones.
Things started unravelling last year when Covid hit
The company blamed this ‘black swan’ event for a 40% drawdown in funds under management. Just a few weeks after the ‘black swan’ announcement, things seemed to be back on track. On May 26 2020 investors were informed that the returns for that month would be about 1.5%. This was false, say the liquidators.
Several investors became nervous and started asking for their money back. Their requests for withdrawal were met with a string of messages explaining technical and regulatory hurdles that had to be crossed before money could be released.
In a letter to creditors on March 9 this year, Imagina FX joint liquidator Christian Bester advised that many investors were paying funds into the FNB banking account of Octox, believing this was the banking account of Imagina FX.
“During our investigations it was discovered that amounts totalling R1.5 billion were deposited into the banking account of Octox (Pty) limited. An application was launched for the provisional liquidation of Octox and was granted on 9 December 2020, with final liquidation being granted in the Western Cape High Court on 22 January 2021.”
The liquidators of Imagina FX and Octox are now asking the high court to sequestrate the Massyns and to hold them personally responsible for the debts and liabilities of both Imagina FX and Octox in terms of Section 424 of the 1973 Companies Act.
On October 27 last year the liquidators were granted an Anton Piller order to search (without warning) the business and residences of directors of the company for information as to the whereabouts of the missing money.
Massyn claimed the Anton Piller order was unlawfully executed, and brought a case seeking to overturn this on 25 February 2021. The court rejected Massyn’s application, and he is now appealing this.
Of the R1.5bn paid into the Octox bank account, only R21k was left
According to the liquidator’s court filings, from July 2014 to October 2020 about R1.5 billion was paid into the FNB account of Octox. By October 2020 there was only about R21 000 left in the account. In all, more than R2 billion was received into the bank accounts of both Imagina and Octox.
Where did all this money go?
Massyn’s replying affidavit in the sequestration case provides almost no clues whatsoever. Last year, the Financial Sector Conduct Authority (FSCA) warned investors that most of their funds are probably lost, and this seems to have been confirmed by later statements from Massyn himself and Primus Markets International, a foreign platform used by Massyn for forex trading.
Though Antoine Papayya was registered as the sole director of Octox, Massyn was the only person with control over its bank account. He obtained sole authority to transact on the Octox bank account by fraudulently representing to FNB that he was a director of the company, when he was not, according to (joint liquidator) Bester’s affidavit.
Neither Imagina FX nor Octox were registered as a financial institutional, bank, deposit-taking institution or financial services provider, nor did they comply with the Collective Investment Schemes Control Act.
Nor were financial statements compiled as required by the Companies Act.
“Massyn has been completely uncooperative in the winding up of the affairs of Imagina FX,” deposed Bester.
“He has also given contradictory accounts on whether there are any funds left, and where the money may be.”
Investors were enticed by the promise of returns of 39-42% a year, and it seems this is how it was able to pay out older investors. Substantial commissions were also paid to those introducing new investors.
In addition to having control of the company bank accounts, Massyn is claimed to have misappropriated large sums for his own benefit, according to Bester’s affidavit.
On one occasion he paid R2.4 million to Papayya “ostensibly for Papayya to turn a blind eye to the abuse of Octox’s bank account”.
Despite apparently roasting the rest of the market with returns of 39-42% over the previous five years, Covid arrived and was a “black swan” event that caused as 40.3% drawdown by May 5, 2020.
But things were back on track within weeks. On May 26, 2020 investors were informed that the returns for that month would be about 1.5%. This was false, says Bester.
Forex trading freeze
On July 17, 2020, Enderstein & Van Der Merwe (EDVM), the attorneys for Massyn and Imagina, wrote a letter to Praesidium that the total funds held by Primus, the Cyprus-based forex trading broker used by Massyn, was about $42 million.
By July 2020, Primus attorney Chrysses Demetriades informed Imagina’s attorneys that a freeze had been placed on all trading accounts as “there is strong evidence to suggest that your client had been providing false information to their respective clients to the level of their investments”.
Massyn later confirmed in an email to his attorneys that “the majority of the funds are gone”.
When a reconciliation was done by Primus, it turns out there was less than €120 000 as of July 2020.
“It appears that not only did Massyn falsify the account balances, but he also managed to rearrange the account names and numbers,” says Bester. “Massyn has clearly manipulated the balances in the account statements. It follows that he did so to deceive the FSCA, and to defraud investors.”
Massyn’s modus operandi
Massyn appears to have had five categories of investors, each of which would receive a different percentage returns on their investments. Investors did not hold segregated accounts, as promised by the company, but were pooled, with Massyn allocating percentage returns to each group. According to Bester’s affidavit, fellow Imagina director Carl Japhtes never saw documentary evidence of actual trading results.
“The inescapable conclusion to be drawn from the facts and documentation obtained by the applicants thus far, is that the investment scheme created and operated by Imagina FX, and more specifically by Massyn, is nothing more than an unlawful and fraudulent Ponzi type scheme, that Massyn knew that Imagina FX would never be able to honour the returns promised to the clients/investors, that the entire scheme would inevitably collapse [as it eventually did] and that the many clients/investors would suffer huge losses.”
An amount of R6.67 million was paid in 14 transactions from Imagina to the Luno accounts of Massyn and one Ricky Lee-Ann Vosloo, of which R4.17 million was transferred into Massyn’s Luno account. Massyn bought and sold bitcoin via his personal Luno account, and withdrew funds from the account which were subsequently paid into his personal bank account. He never paid any monies into Imagina’s bank account.
Japhtes also received R4.86 million from Imagina into his personal Luno account and then purchased bitcoin which he transferred to Massyn’s wallet.
So far claims worth R94.6 million from 85 claimants have been received, though this is certain to increase, as it is known that the total liabilities of Imagina and Octox exceed R1.5 billion.
Massyn responded in his court filings that the liquidators are abusing the court process in trying to bring a sequestration application against him, and that he is already engaged in extensive litigation related to the liquidation of the companies of which he was involved.
Bester responds that Massyn failed to testify at the Section 417/418 enquiries and brought several applications to postpone proceedings, set aside subpoenas, or to suspend proceedings pending applications to be placed before the court.
“The applications brought by Massyn have one object in mind: to avoid being held accountable.”
The sequestration application will be heard in court next week.
Read: FSCA cracks down on Bitcoin after alleged Ponzi scheme