Belvedere Ponzi: Investors lose millions in collapse of JSE-listed BK One

When the Johannesburg Stock Exchange (JSE) suspended BK One’s preference shares [JSE:BK1P] in November 2015, its share price value had plunged from R240m and R10 per share at its opening in late 2011 to a value of R2.4m and 10c per share in late 2015. “It is regrettable that due to circumstances and events entirely outside of the board’s control, the company is faced with imminent closure,” BK One explained in its unaudited condensed interim results for the six months ended 31 August 2015, which it released on 18 December.

BK One posted a headline loss per share of 649c in the six months ended August 2015, compared to HEPS of 18c in the prior comparative period in 2014.

So how did it all go wrong?

Basileus Capital – of which Williams was a founder and CEO – and Kwanda Capital Investments formed BK One as a long-term investment firm in 2011.

The business started showing problematic signs in 2012 when Williams was killed, as BK One had placed its entire portfolio in companies linked to Basileus.

While Williams was forming BK One, his former partner’s Relative Value Arbitrage Fund was revealed to be a Ponzi scheme. Pretorius, who had managed to squeeze R2.2bn from 3 000 investors, was under investigation in 2012 and battling to keep pace with customer withdrawals when he killed Williams.

Another alleged Ponzi scheme kingpin, Cobus Kellermann, was also linked to Basileus and BK One. BizNews exposed his Belvedere operation last year in a series of revelations.

“Since listing in December 2011, 2.3m BK One shares have traded in total,” BizNews founder Alec Hogg wrote in March 2015. “How Kellerman possessed the foresight to sell 65% of the BK One’s total turnover in two sessions straddling the murders, remains a mystery. As Basileus was liquidated, the reasons behind the homicides and Ponzi scheme were never properly communicated to the public.

“Most of the other shares in BK One, which is still listed on the JSE, are owned by Belvedere subsidiaries that are being investigated by the Mauritian authorities,” explained Hogg.

“BK One invested its entire R200m capital into the four high-risk companies into which Basileus Capital channeled money raised in the Ponzi scheme.”

Since the wobbly start on the JSE, BK One’s trout and bass fishing company and its superalloy business continued to operate, but a year after the 26 July 2012 shooting, the share plunged from R9.50 a share to R3.25 in 2013.

Liquidity issues start in 2014

In its annual report for 2014, it cautioned that while BK One was still a going concern, it was experiencing liquidity issues.

“As at 28 February 2014 the fair value of the portfolio was R174.6m. As at 28 February 2015 the fair value of the portfolio decreased to R159.8m. This equates to an 8.5% decrease in fair value since 28 February 2014,” it said.

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This share price remained relatively stable until September 2015, when the price dipped to R1. It cautioned shareholders in October that a lack of investment could have a material impact on BK One’s business and its operations.

By the end of the year, their attempts at securing financing had failed.

On 27 November, BK One said in a JSE Sens statement that the financial results preparations resulted in the company moving from a “going concern” basis to a “liquidating” basis.

Investment progress ‘fatally undermined’

The board said in its interim report released in December that progress in securing the funding needed by the underlying investments was “fatally undermined” by the events surrounding its major preference shareholders and funders.

“The reputational challenges that this has had on further fund-raising efforts both for the company and its underlying investments” also impacted the progress.

BK One’s three largest preference share shareholders – representing nearly 70% of the share capital – were unable to support it as the largest preference share shareholder was placed under administration in the Bailiwick of Guernsey. The second is in the process of being dissolved and the third indicated they wished to disinvest, it explained.

Core investments written down to nil

One of BK One’s investments, Pure Ocean Aquaculture (POA) has investments in Lesotho-based Highlands Trout and Pure Ocean East London, which were both independently “impaired to nil value due to the likelihood that neither investment is considered likely to deliver any value”.

Its investment in Advanced Vacuum Alloys (AVA) in North West province was also impaired to a nil value. BK One said in its recent report this was because of the failure of its working capital funders and “a complete lack of governmental support”.

“Given the above state of affairs, it is not considered probable that the call options pertaining to AVA and or POA will be exercised at their agreed values, if at all,” the board said.