Guernsey Financial Regulator: How Kellermann manipulated Belvedere funds’ NAVs

David Marchant: Says information now made public by the Guernsey Financial Services Commission confirms his allegations that Kellermann and Cosgrove are running a “criminal enterprise”.

By Alec Hogg

Results of investigations by financial regulators into the alleged Belvedere Ponzi scheme are starting to emerge. Investigative journalist David Marchant of OffshoreAlert says they confirm his report that South African Cobus Kellermann and Irishman David Cosgrove have been running “a massive criminal enterprise”. Kellermann and Cosgrove have not commented on the latest allegations , either to the officials or Biznews.
An affidavit submitted by the senior investigator at the Enforcement Division of the Guernsey Financial Services Commission (GFSC) paints a picture of systematic deception by Belvedere’s owners – investment manager Kellermann and his partner Cosgrove, the kingpin with overall control.
The main concern expressed by the Guernsey authorities is that net asset values of Belvedere funds have been artificially inflated to hide consequences of poor investment decisions. The affidavit refers to contagion across Belvedere’s investment fund cells, introducing a risk that “the value of the underlying assets of such funds are not accurately known and that the net asset value attributed to the various cells is incorrect.”
Artificially inflating a portfolio’s net asset value is the worst crime money managers can commit. It distorts performance numbers, allowing those selling the funds to generate fresh inflows which would otherwise be impossible to attract. It also gives existing investors a false impression of what they really own.
The affidavit reveals the first official findings from the GFSC’s ongoing investigation into Belvedere and its associated companies. The GFSC’s counterpart in Mauritius has closed down a number of Belvedere entities after investigating Money Laundering issues and the financial position of these operations. South Africa’s FSB is busy with similar work. Further reports are due for release at the end of the month.
There is considerable detail in the 28-page sworn affidavit sworn by Paul David Yabsley, senior analyst in the Enforcement Division of the Guernsey Financial Services Commission. It is backed up by more than 1 000 pages of supporting evidence supplied by Yabsley to the Royal Court of Guernsey which, as a result, ruled to close another three Belvedere companies late last month. The affidavit can be downloaded by clicking on Yabsley affidavit. The supporting documents are being published on Marchant’s OffshoreAlert website.
Among Yabsley’s damaging findings is that Kellermann operated for years without any genuine oversight. As a result he was able to redirect investors’ money at will, switching investors’ funds from low-risk portfolios into high risk, illiquid assets whose “value” could be manipulated.
In one instance detailed in the affidavit, Kellermann moved investors’ funds from a conservative portfolio through a web of seven Belvedere companies to buy a Stellenbosch property for R28m. Two years later he used another Belvedere fund to buy back the undeveloped land for R72m.
Kellermann - Switched money through several Belvedere companies to buy a Stellenbosch property for R28m; bought it back two years later through other Belvedere entities for R72m.
Kellermann “manipulated” NAVs: Switched money through several Belvedere companies to buy a Stellenbosch property for R28m; bought it back two years later via other Belvedere entities for R72m.

The conveyance document was signed by Kellermann associate Craig Young who, the affidavit states, had been publicly condemned by the SA High Court for committing perjury, so it was “inappropriate for him to be acting in connection with any investment scheme in any capacity.”

In another example covered in detail by Yabsley, Kellermann pumped money from portfolios marketed as low risk into the Belvedere/Basileus partnership’s private equity investments housed in BK One. While the JSE-listed shares were going south (in the wake of the now famous 2012 Basileus double homicide), Kellermann dumped stock owned by his own Ankh funds into Belvedere entities.
The authorities are also exploring the connection between Cosgrove and London-based scam CWM FX.
The affidavit says investors in CWM stand to lose over R365m (£20m) after it was uncovered as a scam after a raid by the City of London Police on March 20. Before the scandal broke, Cosgrove tried to register five CWM Funds in Guernsey which were to be promoted through the CWM FX platform. Click here to read an excellent blog on CWM by Richard Smith, a journalist who specialises in international financial scams.
The Yabsley affidavit says Kellermann and Cosgrove signed for correspondence from the Guernsey authorities. This required them to respond by April 10 and March 26 respectively. Kellermann and Cosgrove did not engage.
Last Tuesday, Biznews asked Werksmans, the law firm acting for Kellermann and Cosgrove, for the duo’s comment on Yabsley’s affidavit by close of business on Wednesday. Werksmans said its clients would be unable to respond so quickly. We extended our deadline. By Sunday evening no response had been received.
We also asked OffshoreAlert publisher David Marchant for comment.
He said: “This comprehensive affidavit from the Guernsey regulator confirms OffshoreAlert’s own conclusions that Belvedere Management Group has perpetrated an audacious and substantial fraud against its investors. It’s essentially an official seal of approval for OffshoreAlert’s exposé of Belvedere.
“Perhaps the most telling part of the affidavit is that Belvedere principals David Cosgrove and Cobus Kellermann were asked to answer questions and provide information for the regulator’s investigation but refused to do so. That shows us all the level of contempt they have for their victims.
“Instead of assisting Guernsey’s regulator, Kellermann instead put time and effort into hiring a defamation attorney in an attempt to bully BizNews into publishing an apology for reporting the facts.”
* Click on Yabsley affidavit to download the 28 page sworn affidavit by Paul David Yabsley, senior analyst in the Enforcement Division of the Guernsey Financial Services Commission. More than 1 000 pages of supporting documents are in the process of being republished on OffshoreAlert.
* Click here to read the “back story” and access links to all the coverage of the Belvedere saga.
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