BFM Raid: Auditor says it was a Ponzi Scheme

A former auditor of liquidated Bluthorn Fund Managers (BFM) who subsequently became its provisional liquidator says investors who were fleeced millions of pula have themselves to blame for investing in a company that was effectively a Ponzi scheme. The troubled company allegedly fleeced district councils, land boards, trade unions, as well as individuals more than P200 million which they had invested in it. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] The latest revelation was made before the Master of the High Court, Chipo Gaobatwe. Under interrogation by attorney Sipho Ziga for the liquidator Kopanang Thekiso, one of the auditors of BFM, Van der Vyver of BDO Certified Auditors, was at pains to answer clearly when asked to confirm his (former) partner’s description of BFM as a Ponzi scheme instead of a Collective Investment Undertaking as its licence issued by NBFIRA purports it to be. The company’s directors were, among others, former cabinet minister Vincent Seretse, former Chairman of Kweneng District Council Geoffrey Sibisibi, and former director of Bluthorn Fund Managers, Eune Engelbrecht. According to a report that was reproduced in court and read out by Ziga, Van der Vyver’s Partner at BDO, Chris Bray, stated that the statutory manager of BFM, Peter Collins, “should be noted for the outstanding work he performed and the extremely comprehensive report that he prepared”. Bray, who was appointed provisional liquidator for BFM also stated: “The provisional liquidator report is merely a summary of the most pertinent factors required to be presented to creditors and the Master.” He was also quoted as saying: “And without a statutory report, we would not have prepared this report. We feel that NBFIRA should consider releasing the statutory manager's report to the creditors, and possibly even within the public domain.” Bray also stated: “However, as provisional liquidators, we are bound by confidentiality not to disclose the whole document. Public institutions were adversely affected by the operations of the company.” Hence, he added, “there is a need for recovery of the funds to be used for other development projects”. Bray is reported to hold that the matter goes beyond a normal liquidation procedure and NBFIRA needs to be involved to perform a full public investigation to ensure that this may never recur. He also recommended that the regulator should “pursue criminal action against the culprits involved”. “Investors, particularly the liquidation creditors, however, also need to recognise that they were to blame since they sought extraordinary returns which they should have realised were not only high risk, and were clearly a Ponzi scheme,” he was quoted as saying in his report. “The famous axiom applies clearly in this case. If the investment looks too good to be true, it probably is.” Ziga asked Van der Vyver if he did not have any concerns about whether or not Bray had a conflict since he was the company’s former auditor and later its provisional liquidator. “Well, I was not involved with that process,” came Van der Vyver’s answer. “I mean, I don't want to speak for Chris (Bray).” Ziga: “But he was your partner?” Van der Vyver: “Yes, but he was approached by NBFIRA.” Ziga: “Yes, he was approached by NBFIRA. But were you not concerned about an ethical conflict that as a partner, he is now the liquidator of the company that you audited?” Van Der Vyver: “But you need to understand the circumstances around his appointment. I don't want to speak for Chris. But my understanding is he was approached by NBFIRA; they asked him to be provisional liquidator. He was appointed as such through the courts.” Asked to comment on Bray’s description of BFM as a Ponzi scheme, Van Der Vyver obliged thus: “I'm not saying I don't agree with that. I just can't conclude that that was the case because when we were auditing it, I mean, I didn't think it was a Ponzi scheme.” Ziga pressed on: “But your partner thinks it's a Ponzi scheme.” He then asked if Van der Vyver “shares the same assessment with his partner, whether it was a Ponzi scheme, he says he does not.” Whereupon one of the creditors, Paycheal Segale, asked Van der Vyver: “What is a Ponzi scheme, if I may ask, by your understanding?” Van Der Vyver answered: “A Ponzi scheme is a pyramid scheme. And it's basically borrowing from someone to pay another in the most simplistic way to kind of explain it.” Segale then asked if Bluthorn was a Ponzi scheme. Van Der Vyver returned: “Well, I can't confirm that. Not to my knowledge.” Segale asked: “So, your partner, who now agrees to be appointed by the regulator, he still is part of BDO?” Van der Vyver responded: “…Based on when I was auditing, it wasn't evident that it was a Ponzi scheme. I'm not sure what else came out later for Chris, who was statutory manager, to have that view. I mean, I don't know.” Segale said Bray: “Comes in and using the same brand (BFM) that was approved in the financials. He's the one saying now this was a Ponzi scheme. So was that to him, was it ethical from the partner to have said that? Yet (it is) the same brand that they used to approve the financials. He’s the other one that comes on the other end and says, it's a Ponzi scheme, which he says to him, it was not.” Van Der Vyver: “I'm not saying it was not. I'm saying I just don't know. And it wasn't clear that it was at the time that we were auditing.” Attorney Kabo Motswagole, who represents BOSETU in the matter, also grilled Van der Vyver on the role played by Bray and his description of BFM as a Ponzi scheme. “So, the same individual whom you were working with proceeds to make a report and you want to so quickly because you're not him, say that you can't own anything in there. You did all the audits. You certified all of them, both of you. And by the way, when somebody engages your firm, does he engage you personally or he engages the firm?” Van Der Vyver: “The firm.” Motswagole: “So, let me ask you this: For his engagement as a provisional liquidator, if you are aware, were all these cheques payable to BDO or to Chris Bray personally by the creditors since we were paying him, anyway?” Van Der Vyver’s answer was that he did not know. Under interrogation by Ziga, the director responsible for the capital market sector at NBFIRA, Juliana White, said she was familiar with BFM which applied for a “license in the capital markets department or rather with NBFIRA to operate a Collective Investments Undertaking, being an investment fund operating an umbrella fund with variable capital”. Ziga also wanted to what White’s opinion was of Bray’s view that BFM was a Ponzi scheme. “What would you also say to somebody who then says, because there's a report, I think it was from Chris Bray who was at some point the provisional liquidator, that the company was actually a Ponzi scheme. What would you say to somebody who would criticize you and say, why didn't you act earlier? And why didn't you realise this was a Ponzi scheme earlier and allowed it to run for three years, especially since the issues of noncompliance were apparent from the beginning?” Conceding that NBFIRA was under-resourced, White said there are a number of tools they use to identify risks. “With the case of Bluthorn Fund Managers, we were only able to realise this model (Ponzi scheme) on site. We wouldn't have picked it up during the off-site supervision.” [/ihc-hide-content]

BTA seeks sponsorship to host World Junior Tennis tournament

Government Pledges Continued Support for Olympic Athletes at Paris Games

Ramoreboli plans on staying with Galaxy amid PSL links

Table Tennis and Tennis Join Top Tier in BNSC Funding

Diamond Duel: Orapa United, Jwaneng Galaxy to shine in Orange FA Cup final

Botswana’s Boxing team at Olympic qualifier without vital practice

Trending Tags

BTA seeks sponsorship to host World Junior Tennis tournament

Government Pledges Continued Support for Olympic Athletes at Paris Games

Ramoreboli plans on staying with Galaxy amid PSL links

Table Tennis and Tennis Join Top Tier in BNSC Funding

Diamond Duel: Orapa United, Jwaneng Galaxy to shine in Orange FA Cup final

Botswana’s Boxing team at Olympic qualifier without vital practice

Trending Tags

BFM Raid: Auditor says it was a Ponzi Scheme

Navigation

Recent News

Site

Welcome Back!

Create New Account!

Retrieve your password

Are you sure want to unlock this post?

Are you sure want to cancel subscription?

Trending Tags

Trending Tags

BFM Raid: Auditor says it was a Ponzi Scheme

This content is locked

Navigation

Recent News

Site

Welcome Back!

Create New Account!

Retrieve your password

Are you sure want to unlock this post?

Are you sure want to cancel subscription?