Did SA man mastermind the world's biggest Ponzi scheme?

Posted 02 August 2015 Written by Business Times
Category Crime

A Miami-based website that exposes investment fraud and Ponzi schemes has put out a warning about Mauritius-based Belvedere Management, which is partly owned by South African Cobus Kellermann, for falsely inflating its investment returns, according to Sunday Times Business Times.

Cobus Kellermann, the man accused of running the biggest Ponzi scheme in the world - worth more than R200-billion - says he can't say if it is indeed a Ponzi scheme.

Cobus Kellerman.JPG"I wouldn't know if it was a Ponzi scheme," he said on Friday, putting on a brave front despite accusations that he masterminded a transnational criminal enterprise.

The accusations centre on Belvedere Management, a Mauritius-based fund manager which manages and administers about $16-billion in funds. It is headed up by the Cape-town-based Kellermann, Irish businessman David Cosgrove and Mauritian Kenneth Maillard.

Despite Kellermann's denials, the company, which manages hundreds of hedge funds and businesses around the world, has begun to look increasingly questionable after two of its Mauritian-based funds were shut down and others placed under investigation.

But speaking from the Stellenbosch office of law firm Werksmans, Kellermann denied doing anything wrong and said he had no idea what was going on at Belvedere. He said he was an "absentee shareholder" of Stonewood Holdings, which owns 51% of Belvedere.

"I am focused specifically on the South African businesses. I've been here for the past three to five years ... Nothing in South Africa is a Ponzi scheme," says Kellerman (pictured above).

Kellermann said Cosgrove managed all the overseas companies, and Cosgrove had told him there was no Ponzi scheme.

"I can only believe him," Kellermann said.

The allegations emerged this week after an investigation by the Miami-based David Marchant, who runs the website OffshoreAlert and claims to be able "to spot a fraud in 10-seconds".

Marchant's website this week claimed Belvedere had falsely inflated the value of funds to dupe investors, and managed funds that had either disappeared or failed in mysterious circumstances (including the £400-million Harlequin Property Fund) and misappropriated millions.

Two of Belvedere's funds have been placed under curatorship and are prohibited by Mauritius', financial services authority from taking new investments. The scandal resulted in local asset managers, including the high-flying Anchor Capital, scrambling to put as much distance between themselves and Kellermann as possible.

For Kellermann, a maths wunderkind who studied at Stellenbosch University and who has been involved in a number of investment schemes in South Africa, the allegations have come as a shock.

Speaking to Business Times, Kellermann said he probably won't be back at work any time soon. "I doubt I'll be coming back professionally."

Sources close to Kellermann say he didn't live the sort of high-flying lifestyle associated with Ponzi kingpins. A former colleague described Kellermann as a down-to-earth family man, saying: "Cobus comes to work in shorts and plakkies. He believes in second-hand cars and doesn't buy new. He likes classic cars and fine wines. But he is also very well educated and thinks before he speaks.

"He has an amazing general knowledge," said the friend.

Despite the description, numerous pictures of Kellermann driving a Ferrari appear on his Facebook page.

Kellermann's neighbour at his Welgemoed house in Cape Town's northern suburbs said she often saw him with his family. Pointing at a facebrick house surrounded by white palisade fencing, she said: "Sometimes I see them in a red Ferrari."

Though it has not been officially confirmed that the funds linked to him and Belvedere are a scam, global regulators are now probing the case.

South Africa's regulator, the Financial Services Board (FSB), confirmed that Kellermann was still linked to five entities and said the board was "liaising and helping [overseas] authorities with investigations".

Though reports suggested the FSB was warned of "Kellermann's activities as early as 2009", the regulator denied it had ever been told of his alleged involvement "in an offshore Ponzi scheme". 

The company that caused the fuss in South Africa was asset manager Clarus, which is based in Somerset West. Until January, Kellermann was CEO of Clarus, which managed eight unit trusts under the MET CI banner, worth R1.35-billion.

Today, Clarus is little more than a shell company, and those funds have been moved to a company called Contego.

The Ponzi scandal has rattled investment companies which have managed funds for Clarus, including the JSE-listed Coronation Fund Managers and Anchor Capital.

Anchor has distanced itself from Kellermann. It terminated its deal to manage three of the Clarus funds and issued statements reassuring investors that their cash was safe. "Aside from providing asset management services to Clarus, Anchor Capital has never been in business with Mr Kellermann," it said.

Anchor also scrapped talks to buy Contego Holdings - the asset manager at one stage apparently controlled by Kellermann - for R28-million on the basis that it had failed to make a "full disclosure".

"The board will continue to take a firm stance where contracting parties fail to make material disclosures," it said.

Contego Asset Management CEO JC Louw said the deal with Anchor was a "casualty" of the fallout over the Ponzi claims.

"To run clients' money, you need a [good] reputation, and to get a [good] reputation you need good people working there."

Louw also distanced the current Contego from Kellermann, saying he was "not a director, not an employee [and] not a key individual" at the company.

But questions remain over some Clarus funds that had been managed directly by Kellermann - including the Clarus Strategic Growth Fund.

DeVere, a global asset manager with operations in South Africa, said this week it had invested in that fund "several years ago". Initially, it did well, but in 2011, DeVere CEO Nigel Green ordered that his investors divest, and days later the fund was suspended.

The man who plays fraud buster

David Marchant.JPGDavid Marchant (left), the Miami-based editor and owner of OffshoreAlert, is in no doubt that Belvedere was simply a monstrous Ponzi scheme.

"There's no substance to it," Marchant said of the fund.

He said he could not understand why reputable asset managers sank money into Belvedere. "Why can't they see it?

"It's like a car - if it has got four wheels and a steering wheel ... it's a bloody car."

After the accusations this week, it is almost certain that Belvedere will not sit back while claims fly about its alleged dirty dealings.

But Marchant said he was ready for a fight.

Kellermann said on Friday he would not institute legal action against Marchant, but his partner, Dave Cosgrove, was likely to take action from the US.

"It [legal action] will be the biggest mistake of [Cosgrove's] life," Marchant said.

"Metaphorically, I will put him over my knee and give him a public spanking and humiliation on behalf of his many victims.

"I will also endeavour to have him arrested, a role I have played with some aplomb in the past.

"It's one thing ripping off old ladies via investment frauds and another thing entirely taking on OffshoreAlert."

Marchant prides himself on the fact that his website has exposed numerous scams but has not yet been taken down.

OffshoreAlert said it had been "sued for libel multiple times ... [but had] never lost".

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