Praesidium lead trader Craig Massyn fails in attempt to reduce R20m penalty

Former Praesidium lead trader Craig Massyn’s attempt to reduce the R20 million administrative penalty imposed by the Financial Sector Conduct Authority (FSCA) has been rejected by the Financial Services Tribunal.

Massyn was one of five Praesidium officers debarred in 2022 from practising in the financial sector after the company collapsed owing hundreds of millions to investors.

The 39-year-old protested that his 20-year debarment amounted to a lifetime ban from the only industry he knows.

Four other officers were debarred for lesser periods – Andrew Cunningham-Moorat and Brett Bukes for 10 years, and Cindy Lee Schuster and Ryan van Niekerk for five.

Investors pumped nearly R1.4 billion into Praesidium, lured by promises of returns exceeding 40% a year through forex trading.

Less than 20% of the funds received by Praesidium were used for forex trading, the balance being used to pay clients who wanted to withdraw funds, and for operational and director expenses.

This led the FSCA to claim that Praesidium operated much like a Ponzi scheme.

Clients would deposit funds into Praesidium’s FNB account, which were then transferred to another FNB account in the name of Octox Ltd. This was a violation of the Financial Advisory and Services (Fais) Act as Octox was not an authorised Financial Services Provider (FSP) and was therefore prohibited from receiving client funds.

Another company under Massyn’s control was Imagina FX, which was placed in liquidation in October 2020.

Read: Bleak outlook for investors in liquidated Imagina FX scheme [Aug 2022]

The FSCA and liquidators were tasked with unravelling the complex flow of funds between Praesidium, Octox and Imagina FX.

‘Virtual secrecy’

Massyn was the lead trader at Praesidium and, according to a former employee who asked not to be named, operated in virtual secrecy, which made it impossible to verify whether the claimed profits were real or not.

It turns out they were not. Nor was the company licensed to trade forex instruments.

Only Massyn had access to the company’s trading platforms, and the evidence gathered by the FSCA shows he was losing 50% of the time. At the start of 2020, Praesidium sent out a newsletter to clients congratulating itself for achieving returns of 43.5% for the prior year.

By June 2020, clients received some disturbing news. Covid was a ‘black swan’ event that had devastated client capital, causing a 40% drawdown.

Rattled clients trying to withdraw funds were fended off with messages explaining technical and regulatory hurdles that had to be crossed before money could be released.

The FSCA started to receive complaints that Praesidium might be soliciting investments from the public and operating an unapproved foreign collective investment scheme.

‘Not fair’

Massyn did not dispute that Praesidium and its directors contravened various financial sector laws, but argued that the 20-year ban and R20 million penalty were disproportionate.

He had no means of paying the penalty as his estate had been liquidated, and pointed the finger of responsibility at fellow directors charged with ensuring compliance with financial sector laws.

“My role was solely the trader in a different office in a different province. Based on our roles and duties as directors, should the penalties not be proportionate?” he argued in papers before the tribunal.

Massyn disputed the FSCA claim that his financial benefit from Praesidium amounted to R46.6 million, though the tribunal agreed with the FSCA that the size of the penalty was levied based on additional factors, such as:

• The nature, duration, seriousness and extent of the legal contraventions;
• The losses suffered by thousands of clients (many of them placing their entire life savings into the company); and
• Praesidium’s deliberate misrepresentation of its trading success.

In a statement responding to the tribunal’s ruling, the FSCA said it welcomed the decision “and will now proceed to execute its decision against Massyn”.

“The FSCA will also fully assist the criminal agencies in any proposed prosecution,” it said.

“The Tribunal considered that Massyn was ‘at the centre of the scheme, as he was the main trader’ … and ‘the decision on what to buy and sell fell squarely on his [Massyn’s] shoulders.’ The Tribunal found that as trading was solely Massyn’s responsibility, it put Massyn in a ‘distinguishable’ [position] and ‘on a different footing’.”

FSCA decision ‘cannot be faulted’

The tribunal found that the FSCA had carefully considered all the relevant factors and relevant laws before imposing the penalty, and that “its decision is sound in law and cannot be faulted”.

“The FSCA reiterates its commitment to visible enforcement and credible deterrence of unlawful activities that cause harm to the investing public.”

There seems to be little hope of recovering funds in any of the companies controlled by Massyn.

Imagina joint liquidator Christian Bester told Moneyweb in June that no funds had been recovered in the liquidation process “and it would appear that the bulk of the funds was utilised to pay investors as part of the Ponzi Scheme”.

“We are however contemplating whether we should now proceed to institute legal action against certain of the investors in terms of Sections 26, 29 and 30 of the Insolvency Act.”