In a ruling that could have wide-reaching implications for victims of financial fraud, the High Court in Durban has dismissed the applications of five individuals seeking the return of their investments in the illegal Ponzi scheme, Crypto Mzansi Group. The applicants, who had invested in the scheme, were hoping to recover their funds from three bank accounts connected to the scheme’s orchestrator, Mfundo Manci.
The funds, totaling R4.5 million, had already been forfeited to the state under the Prevention of Organised Crime Act (POCA). The court ruled that the forfeiture was lawful and would not be overturned, leaving the investors without a means of reclaiming their lost money.
Court Dismisses Claims for Refunds
The applicants, including Shaun and Remanah Gadiah, Kevin Ramlall and Sarika Ramnarain, and Evashni Singh, argued that they were unaware the Crypto Mzansi scheme was illegal, despite the improbably high returns it promised. The scheme had solicited investments mainly through social media, promising extraordinary returns of up to 3,000%. For example, a long-term investment of R10,000 was claimed to yield R300,000 in just nine months.
In dismissing their case, acting Judge Garth Davis made it clear that the investors should have been aware that the promised returns were too good to be legitimate. “The applicants got involved in a scheme promising quite astronomical rates of interest,” Judge Davis said. “The common cause facts do not suggest that they were unaware that the scheme was illegal.”
The judge further emphasized that the forfeiture of the funds to the state did not require a criminal conviction or charges, as POCA allows for the forfeiture of assets linked to criminal activities. He ruled that the forfeiture was neither disproportionate nor arbitrary, declaring, “A clear crime has been committed.”
Legal Precedent Set for Ponzi Scheme Victims
The case consolidates three applications by the five participants, all of whom sought a variation to the March 2023 forfeiture order. The funds in question were held in three bank accounts controlled by Manci, the sole director of Crypto Mzansi Group. However, the court sided with the National Director of Public Prosecutions (NDPP), who had argued that the funds were part of the illegal scheme and therefore rightfully forfeited to the state.
Judge Davis’ decision not only denied the applicants’ request but also reinforced the legal precedent that victims of Ponzi schemes may not have an automatic right to recover their investments. Under POCA, any assets deemed to have facilitated or resulted from criminal activity can be seized by the state, regardless of whether those involved were charged or convicted in a criminal trial.
Investors Left Without Recourse
The ruling leaves the five individuals who participated in the Crypto Mzansi scheme without any apparent recourse to recover their losses. Despite claiming ignorance about the scheme’s illegality, the court found that they should have been aware that the promised returns were unrealistic. The judgment serves as a warning to potential investors to exercise caution when approached with investment opportunities that seem too good to be true.
With Ponzi schemes continuing to thrive on social media and other platforms, the Crypto Mzansi case underscores the importance of due diligence for investors. The decision also highlights the challenges faced by victims of financial fraud in reclaiming their money once it has been forfeited under laws designed to combat organized crime.
Impact on Future Cases
The court’s decision is likely to be a landmark ruling for similar cases, where victims of fraudulent schemes seek the return of their investments. It underscores the difficulties in proving innocence or ignorance when participating in schemes that promise abnormally high returns.
For South Africa, where Ponzi schemes and other investment frauds have been on the rise, this ruling may serve as a legal precedent for how future cases involving forfeiture and fraudulent investment schemes are handled.
