THE liquidation bid of Financial Services Regulatory Authority (FSRA) versus Status Capital Building Society (SCBS) has failed to take off again.
The counsel representing Nhlangano Town Council, Mxolisi Dlamini, informed the court that they received the heads of argument on Monday at around 10pm.
This is after the town council moved to have Status Capital’s funds frozen to protect its E10 million investment following a series of broken promises.
However, yesterday Judge Mumcy Dlamini noted that the matter had been postponed several times since February.
“The reason we set the date for today (yesterday) was because you said your senior counsel would be available. There are a few questions that I need to ask the senior counsel,” she said.
She added that there would be no need for the advocate to fly from South Africa to the country for the arguments, as they can be done virtually.
Mxolisi, however, asked for the court’s indulgence to seek instructions from his clients on the matter.
When the matter returned to court, Dlamini informed the court that he pleaded for the court’s postponement on the matter to July 23.
“When we adjourned, we had to consult with the advocate for a suitable date and we agreed that July 23 is suitable and the advocate will be before court,” he said, adding that he made an undertaking that the matter would proceed.
“If the advocate does not come, we will proceed virtually,” the judge said.
The matter was brought to court by FSRA for arguments after it alleged that SCBS never conducted the business it was licenced to undertake but instead operated a sophisticated alleged pyramid or Ponzi scheme that collected more than E205 million from members of the public before funnelling most of the money to related companies controlled by the same individuals.
The allegations are contained in the FSRA’s heads of argument filed before the High Court in support of its application for the final winding-up of the financial institution.
The regulator argued that the company was used as a vehicle to deceive investors into believing their money was being placed in safe, low-risk investments when, in reality, the funds were allegedly diverted to related entities, operational expenses and payments to earlier investors.
A provisional winding-up order was granted on December 24, together with the appointment of a provisional liquidator. The regulator is now seeking confirmation of the final liquidation order.
However, FSRA argues that the opposition lacks merit and liquidation remained the only lawful and practical remedy.
“SCBS never operated the business it was licenced to operate but instead operated as a money laundering pyramid scheme,” the regulator states in its court papers.
According to the court papers, the institution never conducted the business of a building society, namely advancing loans secured by mortgages over immovable property. Instead, the regulator said the institution collected deposits, recycled investor money, funded its own operations and paid returns to earlier investors using deposits from newer investors.
According to the regulator, the scheme eventually became unsustainable because it depended entirely on new investor deposits. By mid-2024, the institution had allegedly begun defaulting on matured investments while continuing to accept fresh deposits from members of the public.
The regulator argued that the institution breached numerous provisions of the Building Societies Act, the Financial Services Regulatory Authority Act, the Money Laundering and Financing of Terrorism (Prevention) Act and the Consumer Credit Act.
It alleges the institution failed to obtain regulatory approval before investing in debentures, failed to comply with anti-money laundering obligations, engaged in misleading and deceptive conduct, failed to protect investor funds and conducted business in an unsafe and unauthorised manner.
The matter was postponed to July 23 for continuation.
