FSCA warns public: Banxso’s licence remains suspended as investigations continue

The licence of the trading platform Banxso remains withdrawn until further notice, the Financial Sector Conduct Authority (FSCA) has cautioned. It has brought the investigation of Banxso and preliminary findings to the attention of the Financial Intelligence Centre (FIC) and the Asset Forfeiture Unit (AFU) of the National Prosecuting Authority (NPA).

The warning comes after the FSCA received allegations that Banxso was contacting clients and advising them that it “has been cleared”, that its licence had been reinstated and that it may render financial services. The FSCA says it has interviewed witnesses who have confirmed this and will investigate these allegations further.

The FSCA is also investigating statements from Banxso clients who maintain that Banxso is continuing to conduct financial services business, notwithstanding the withdrawal of its licence.

Indications are that consumers who have already lost money via the platform are being encouraged to commit more funds to Banxso to recover their trading losses.

The FSCA’s investigation into the activities of Banxso and its officers is ongoing.

Read more: Pensioner loses everything on investment platform Banxso

Earlier this year, Daily Maverick reported that an investor had lost about R850,000 of her pension savings to a “scheme” after she saw that it was supposedly promoted by Elon Musk. At the time, Banxso offered to “give her R850,000” to continue trading on its platform “provided she does not deal with the media or the ombudsman”. This is a huge red flag as it implies the company was trying to buy her silence.

Read more: Rise in investment scams and deepfakes perpetrated by fraudsters on social media

Recent developments in the Banxso saga

On 2 October, the FIC intervened and placed a hold/freeze on Banxso’s bank accounts, and on 14 October the NPA successfully applied for a preservation order.

On 8 November, the Western Cape Division of the High Court reconsidered and set aside the preservation order. However, the court ordered that Banxso could not withdraw or allow the withdrawal of any funds in the bank accounts, other than to migrate clients to an alternative financial services provider authorised by the FSCA. The transfer of funds to an authorised financial service provider (FSP) is required because Banxso’s FSP licence remains withdrawn, and as a result, Banxso cannot conduct any financial services business.

“Banxso itself cannot deal with the funds in the bank accounts that were preserved. It is also a condition of the provisional withdrawal of Banxso’s licence that it must transfer all its clients to an authorised financial service provider,” said the FSCA on Tuesday. The regulator confirmed it was in discussions with Banxso to ensure an orderly transfer of clients.

The law firm Mostert and Bosman has filed an application in the Western Cape Division of the High Court for the liquidation of Banxso on behalf of its client Carol Wentzel. Attorney Pierre du Toit noted that Wentzel was just one of many Banxso clients who responded to deepfake ads and lost their money. They have never been offered refunds or settlements.

“The number of clients lured to Banxso through the deepfake advertisements is substantially more than the original group of 70 who lodged complaints with the FSCA,” said Du Toit in a supplementary founding affidavit.

The hearing of the liquidation application has been postponed to 4 December.

Banxso’s response

A notice on Banxso’s website, dated 16 October, says the company has become aware of the recent adverse media coverage related to the FSCA’s decision to provisionally withdraw its FSP licence, and the suspension of the company’s bank accounts.

“We are currently engaging with all relevant stakeholders, together with the FSCA, to gather all of the necessary facts and moreover, understand the full scope of the situation at hand,” states the notice.

“While this matter is under investigation, it is essential to clarify that the company remains committed to transparency and regulatory compliance across all of its operations. In its media release, the FSCA emphasised that the investigation is not complete and that it has made no findings to date. The FSCA also records that Banxso is co-operating fully with the investigation.

“We emphasise that the regulatory steps taken against Banxso at this stage are only provisional, pending the outcome of further investigations by the FSCA. The company is committed to ventilating all of the relevant facts that may assist the FSCA in finalising its investigations with a positive outcome towards the company and its clients.

“The company vehemently denies all allegations of financial misappropriation and/or the maladministration of client accounts, as well as any and all allegations in respect of ‘deepfake advertisements’ and any impropriety related thereto. The company maintains that this is a misstatement of fact, which will be fully ventilated in the appropriate forums, as more details are made available to us.” DM