The son and the former wife of Classic Financial Services (One) director Cobus Geldenhuis were sequestrated this week, the latest dominoes to fall in an investment scam reckoned to have roped in close to R800m. From Moneyweb.
The dominoes are starting to fall in an investment scam headed by Cobus Geldenhuis, with the sequestration this week of his former wife Jackie and son Dewald.
Cobus has already been sequestrated and his company Classic Financial Services (One) placed in final liquidation after numerous complaints were lodged with the police and the Financial Sector Conduct Authority (FSCA) by investors who say they have been scammed out of millions of rands.
The scope of the scam is staggering in its breadth.
A report by the FSCA shows that more than R617 million was deposited into bank accounts controlled by Geldenhuis between January 2019 and August 2022. None of these funds were invested, as promised by Geldenhuis. Three quarters (or about R455 million) was used to pay out existing clients, a clear sign of a Ponzi scheme, and 21% (R129 million) went to finance Geldenhuis’s personal lifestyle.
These figures only go back to January 2019. A longer-term analysis by the liquidators suggests the total could top R800 million.
In March this year, the FSCA put out a fresh notice – on top of previous notices issued in November 2022, May 2023 and December 2023 – warning that Classic Financial Services (One) and Geldenhuis were still up to their old tricks by “rendering financial services to the public”.
Assets
The National Prosecuting Authority recently obtained a provisional order in terms of the Prevention of Organised Crime Act (Poca), which is an order freezing assets believed to be derived from criminal activity. The liquidators successfully intervened in the case so that all property attached under the Poca order now forms part of Classic’s insolvent estate.
Moneyweb spoke to several clients who are hoping to see some return of capital once the liquidation of Classic is wrapped up.
“He’s a great salesman,” says Juli Bredenkamp, one of the investors. “He could sell you anything and if you question him, he always has an answer. He gets you to doubt yourself.”
He talks knowledgeably about stocks such as Tesla, Apple and Northern Trust, the state of global markets, and the opportunities that await the nimble investor.
But as the FSCA investigation shows, it’s all a sham. Geldenhuis appears to have played on investors’ lack of knowledge of the markets, and the fact that investments in Tesla, Apple and other popular stocks are easily available through reputable investment schemes, both in SA and abroad.
He presented potential investors with a fake fact sheet for a fake investment fund, often convincing them they were investing with Northern Trust (they weren’t).
Earlier this year, eNCA set up a sting operation and caught Geldenhuis attempting to solicit investments despite his debarment and the liquidation of Classic Financial Services.
Despite his apparent show of contrition during the FSCA investigation and Section 417 inquiries (under the Companies Act) brought by the liquidators, Geldenhuis appears to be carrying on as usual.
He merely switched horses from Classic Financial Services to continue trading under the name Pecunia Systems, which is a licensed financial services provider, or as a lone wolf financial advisor. Pecunia told the FSCA that it has no association with Geldenhuis, nor did it give permission for him to use its licence. It has since asked the FSCA to allow its FSP licence to lapse.
Debarred, fined
The FSCA has debarred Geldenhuis for a period of 20 years and imposed an administrative penalty of R143 million for violating the Banks Act by accepting deposits and for operating without a financial licence.
But a voice recording from a potential client shows that as recently as June 2024, Geldenhuis was back on the campaign trail, attempting to solicit funds while contemptuously dismissing the brushfire of legal woes and investigations he has brought on himself. But on this occasion, the would-be investor had the foresight to speak to one of the many furious Classic investors and was dissuaded from handing over any money.
During his sales pitch, Geldenhuis claims to have more than 4 000 clients and R35 billion in funds, which is almost certainly a wild exaggeration, though he claims in private conversations that the regulators do not have access to all the funds under his control. Most of his clients appear to have come via referral.
Listen/read: FSCA update: New warnings and scams you should know about
Another client, Tommy Butler, invested R3.2 million in 2020, having been introduced by a relative. “I was given assurances that I would earn 17% a year, which was not exceptional and seemed reasonable at the time.”
A condition of Butler’s investment was that he receive a payout of R40 000 a month, which he received – for about the first 12 months.
Then it stopped. Butler had invested some savings at first, then borrowed more funds to invest with Geldenhuis.
“When the monthly payouts stopped, I got a whole lot of stories, like there was a hold up at SA Revenue Services, his bank account had been flagged, then the liquidators were after him. He denied any wrongdoing, despite everything that had happened.”
Geldenhuis has a long and colourful history. He was a key individual at Fugio Financial Services, which had its licence withdrawn in 2011 for regulatory lapses and a failure to provide financial statements to the regulator.
First debarment
Fugio’s clients were taken over by Pecunia Systems, where Geldenhuis was a director from 1999 to 2010 but resigned following his 2009 debarment by Momentum Metropolitan Life from rendering financial services on the grounds of dishonesty.
He sold two friends a Momentum policy as a single premium investment that turned out to be a 10-year recurring premium policy.
One of the complainants had accumulated $700 000 working abroad and instructed Geldenhuis to invest $400 000 offshore and the balance in SA. Geldenhuis took matters into his own hands and invested just $280 000 offshore in a Momentum investment and the balance of $420 000 locally in a Momentum endowment. A few days later, he took R1.5 million of the endowment and used it to pay the first annual recurring premium on which he was paid commission. The investor could not afford the annual recurring premium of R1.5 million on the endowment and was forced to terminate the policy early, resulting in a substantial loss on the investment.
Both complainants incurred early termination fees of R558 933 and R445 781, respectively.
Geldenhuis promised the Ombud for Financial Services to compensate the victims in the above case but reneged on that agreement. “It is not farfetched to conclude the lengthy term of 10 years suited [Geldenhuis’s] penchant for large commission payouts,” wrote the ombud in 2013. Geldenhuis was ordered to compensate the victims.
The casino ‘winnings’
Some of the family dealings are disclosed in the Pretoria High Court judgment that placed Dewald Geldenhuis under provisional sequestration in April this year. The court found that Jackie had received an amount of R25.6 million from Classic and a further R7.5 million from Geldenhuis.
Jackie appears to have a fondness for gambling, receiving winnings of R5.2 million against a gambling-related outflow of nearly R15 million.
She paid out a further R15 million on day-to-day living expenses, which included spending on Mr D, Woolworths, Dis-Chem, Clicks and airtime.
Further forensic analysis reflected her net loss from gambling at R9.3 million – just for the period 7 August 2021 to 22 April 2023. Over a slightly longer period, from 5 August 2021 to 5 September 2023, Jackie won R12.3 million from gambling but had lost R21.5 million.
This freewheeling love of gambling with other people’s money has angered many of the investors.
Liquidators and forensic investigators had to reconstruct these figures from bank statements.
“There is no doubt that Ms [Jackie] Geldenhuis’ bank account was used as a conduit by herself and for the benefit of Cobus. A substantive portion of the monies deposited into Ms Geldenhuis’ account were investors’ funds and the liquidators have a mandate to locate the whereabouts of these funds as they have to account same to the investors’ claims,” ruled Judge Harshila Kooverjie in the Dewald Geldenhuis sequestration case.
Anticipating the looming sequestration, Dewald started disposing of movable assets such as vehicles and watches.
His home was also put up for sale, but liquidators managed to put a hold on that transaction. Dewald began disposing of his assets after the FSCA investigation commenced in 2022.
“Surely at this point he must have been aware that Classic was in trouble,” wrote Judge Kooverjie. “The chronology reflects that Classic was wound up in May 2023 and the liquidators were appointed in June 2023 respectively. The motor vehicles were sold in January 2023, February 2023 and June 2023. It was pointed out that Mr Geldenhuis is still in possession of [purported] valuable art works and other luxury items which have as yet not been disclosed.”
Geldenhuis appears to have had no proper accounting records, and ran the business on an Excel spreadsheet, carefully controlling the information given to his staff.
As the liquidators keep digging, they are finding where more of the money went.
A sum of R19 million was loaned to an associate of Geldenhuis, Tony Visser, who runs a company called Summit Renewables. The liquidators have brought a sequestration application against Visser for the recovery of funds, which they say are the proceeds from the Ponzi scheme Geldenhuis is claimed to have operated.
A more extensive accounting of the Classic business dealings is expected in the coming weeks when the liquidators finalise their Section 402 report in terms of the Companies Act, which they are required to compile on a liquidated company’s state of financial affairs and the reasons for the insolvency.