A month and a half after our first interview, OffshoreAlert’s David Marchant has been totally vindicated. His research into publicly uncovering the multinational Belvedere Ponzi scheme has been supported by a lengthy affidavit and over 1 000 supporting documents submitted to court by the Guernsey Financial Services Commission. We caught up with Marchant today to ask where to from here – and explore whether there is indeed a connection between Belvedere kingpin David Cosgrove and the R365m CWM FX scam in the UK which has already led to a dozen arrests. Marchant also couldn’t resist having a swing at Moneyweb, which was highly critical of the US-based investigative journalist when the story broke – but has now switched horses. – Alec Hogg  Â
In this special podcast, we pick up with David Marchant from Offshore Alert, the man who broke the Belvedere story. David, I guess we can call them Ponzi kingpins quite easily now, rather than having to put âallegedâ in front of it.
Yes. Absolutely. You could probably fit in a few other words, other than Ponzi. It wasnât just a Ponzi scheme, but that was certainly one element.
On the 25th of March, when we last spoke, you went into quite a lot of detail. Unpack it for people who donât have your insight…..
Well, since at least 2008, the Belvedere Group has administered, managed, or advised on hundreds of Hedge Funds. These funds have gone out into the investment community, raised substantial amounts of money â certainly hundreds of millions of Dollars, and my guess would be that itâs one billion or more (maybe billions) â and once that moneyâs been raised, itâs basically been misappropriated by insiders in a number of ways. I would be surprised if a single one of those hundreds of Hedge Funds has ever made any money for their investors. The purpose of them being created and operated was to enrich insiders and misappropriate the investorâs money in every single case.
David, youâve just gotten back from your conference that you hold, focusing on offshore financial centres…..
We get about 250 registrants at our Annual Miami Beach Conference. The funny thing is (and it really isnât funny) we teach people how to do financial due diligence and how to detect investment fraud. Investors are just not interested in this type of event. Our clientele basically consists of financial institutions/regulated law enforcement, and itâs a sad reflection of the investing world when investors â in my considerable experience â are just not interested in learning how to do any credible due diligence. Many peopleâs investment decisions are based on a gut feeling.
Was there much talk at the conference about the Belvedere duo?
There was certainly some talk. In fact, one of our speakers, one of the best-known asset recovery attorneys in the world, had just returned from Stellenbosch. Iâm not quite sure what he was doing there but he travelled extensively and he said that a few people came up to him and spontaneously started talking about the Belvedere fraud, me, and OffshoreAlert. He was able to say, âYes, I knowâ. He did very well. Iâve been involved in this conference for over a decade. There was certainly some talk but you have to bear in mind that the people I deal with there are involved in one major fraud after another. While Belvedere was certainly,quite noteworthy, the tales they have are quite similar and quite depressing â tales of one major fraud after another in different parts of the world.
What happens from here to Cobus Kellerman and David Cosgrove?
Well, you have to figure that at some stage, law enforcement will step in. I would be surprised if law enforcement isnât already looking at this. My experience of law enforcement isnât very positive but this is just so big and it affects so many investors in so many countries, that law enforcement in one of these countries has to be looking into this. At some stage, if they do look into it, Kellerman, Cosgrove, and their associates have to decide what they do. In my experience, people under investigation tend to go on the move as opposed to being static, but youâd be surprised at the number of fraudsters against whom nothing happens on the law enforcement side. In an ideal world, people commit criminal offences, theyâre investigated properly, and theyâre held accountable for their actions but we donât live in a perfect world. We live in a far from perfect world, where a lot of people get away with a lot of things.
So far, weâve had a damning affidavit from the Guernsey Financial Regulator. They said there are still further investigations going on. Weâve heard nothing yet from Mauritius, although they have promised to give us information at the end of the month, as has the South African Financial Services Board. So far, though, there seems to be enough evidence to perhaps put these guys behind bars for a long time. You sound a little bit sceptical about it. Is it just too difficult to prove these positions?
Well, a number of factors play into it. One is that a complex fraud like this, which is complex in the sense that it involved many individuals, many companies, and many jurisdictions, makes it more difficult to investigate. In addition, in my experience, law enforcement arenât the most efficient or smartest bunch of people I have come across. Itâs just the nature of the beast and the world we live in. I always tell investors that you cannot rely on regulators or law enforcement. You have to rely on yourself because when you become a victim of financial crime; in my experience, you stay a victim of financial crime so it places an onus on you to do your own research before parting with your money. You canât point to somebody and say, âWell, they donât have a criminal recordâ because many crooks (in my experience), donât have criminal records because law enforcement is just not very good at holding people accountable for their actions. Itâs just the way it is.
David, there was mention on your website and also, in the Guernsey Affidavit about CWM. Is there a connection between it and Belvedere?
Yes. Look, the CWM Group is unravelling along with all of the Belvedere companies but thereâs definitely a link. Iâve spoken to somebody who worked for CWM and he just paints a horrific picture of abuse of both employees and investors. He said that the guy who ran CWM in London was in pretty much, daily contact with David Cosgrove and also, the Cayman Fund vehicle that Belvedere set up as their Mauritian Fund vehicles were being suspended, they had several cells involving CWM. In addition, in the Guernsey Affidavit, by the regulator I believe, they go into CWM so CWM is definitely part of Belvedere Management. What has happened though, in recent months, is that Belvedere has exercised control over a company like CWM, indirectly. The Belvedere name has become so tarnished that it doesnât behove the insiders to have a direct link between Belvedere and companies like CWN, so there is an indirect link. Theyâre basically using proxies, as it were.
When you take a broader look here, why havenât we had investors in these various funds jumping up and down and demanding justice?
Well, there are a few reasons. Firstly, as with law enforcement, theyâre just not the brightest bunch of people youâll ever come across, which is why they invested in something as Mickey Mouse as this in the first place. Secondly, itâs very difficult for victims of fraud to accept that they are victims. Itâs almost like the first step to recovery for an alcoholic being admitting that you have a problem. Itâs very similar with fraud. Investors have to accept that theyâve been defrauded and their money is gone, and thatâs quite difficult. Itâs ironic actually, in the case of Belvedere. Iâve had more calls from asset recovery attorneys looking for a piece of the action, than I have from investors wanting to know whatâs happened to their money. In fact, Iâve had had very little correspondence or communications with victims, but Iâve had several calls from well-known asset recovery attorneys who just want a piece of this action. In the asset recovery world, this is considered to be lucrative action. The mentality of victims is fascinating. You would have expected me to be inundated with calls from concerned investors and that just hasnât been the case.
Could it also be that the money that was invested here was illegally put into some of the funds?
With something this big, Iâm sure X percent of the money might be of dubious origins but generally, I donât get the impression with Belvedere, and that most of their investment came from dubious sources. My understanding is that it came from regular people who arenât very sophisticated whom, quite frankly, invested in garbage and thatâs it. I donât believe that most of them have anything to hide other than embarrassment, maybe.
What then is the next development?Â
What I would expect to happen in a case like this with so much money at stake is for asset recovery attorneys to be the most effective remedy available to the victims because you donât have the inefficiencies with asset recovery attorneys, as you would with law enforcement and regulators who have to operate by a different set of rules. With asset recovery attorneys, itâs all about recovering money and divvying it up between victims and themselves. Theyâre profit motivated, which tends to be the best motivation of all, in my experience. How these things progress is anyoneâs guess, but I doubt that something like this will progress smoothly because they seldom do. In an ideal world, if something collapses, regulators take action. Law enforcement takes action. Assets are frozen and then recovered, and victims get their fair share but we donât operate in that sort of world. Asset recovery attorneys will only become involved if there are assets to be recovered. Often, with fraud, many assets have actually been spent by the crooks and cannot be recovered. Theyâve been spent on meals, on travel, on entertainment, and in ways that we canât possibly recover it. You can only really, recover assets where people have bought fixed items like property and perhaps planes etcetera, and have large amounts of cash squirrelled away, somewhere in the world. I expect this to unfold in a somewhat disjointed and chaotic manner. I donât think itâs going to be smooth.
When it all broke, Cosgrove and Kellerman said that they would appoint Grant Thornton to have a look into their businesses and to justify that they hadnât done anything wrong. Isnât that like bringing a butcher to the Christmas party if you happen to be the turkey?
Well, I donât know whether they actually appointed Grant Thornton, or just announced it. I think that when a story like this breaks; if youâre one of the insiders, you have to say the right things and take actions to soothe investors. You need to create the impression that youâre in control, everythingâs okay, and the big bad journalist is wrong. I donât know whether they appointed Grant Thornton, but they have to do something. Whatâs interesting is that Grant Thornton were actually, appointed as administrators in Guernsey. Itâs rather odd. If in fact, Belvedere had appointed them, that would appear to be a conflict â quite clearly â and I believe that Grant Thornton were involved with Belvedere in the past, in various capacities as were many well-known firms/service providers.
From your perspective David, when you first came out with this story, there was a lot of scepticism. In fact, some media said you were just looking for headlines…
Well, I must say that the most reckless and irresponsible follow-up reporting of any fraud that Iâve exposed was done by Moneyweb and it was quite astonishing to witness. I had extensive dealings with the journalist who wrote the story (Patrick Cairns) and the editor of Moneyweb â I think his name is Ryk van Niekerk. It was amazing. Their reporting was so naĂŻve. They were just interviewing people who were involved in the fraud, believed everything that they said, and regurgitated as fact. They made one factual error after another. When I raised it with the editor, he wrote me an email, basically accusing me of flawed research. I said, âPretty please, point out a single thing that Iâve gotten wrongâ and I never heard from him again. Then I did some research on him and discovered that heâd won some sort of press award in South Africa, and I felt like smashing my head against the wall because Iâm not supposed to be in conflict with journalist. I did the legwork and accumulated the evidence and Iâve been helping many journalists in South Africa who are proper journalists and are genuinely interested in this story, and I sent them a lot of information. The only news outlet that I dealt with who had no interest whatsoever, in receiving my information, was Moneyweb and thatâs the only news outlet that reported garbage about this. For reasons best known to themselves, they just decided, âLetâs get on the side of the crooks and give them some supportâ. I donât think Iâve ever encountered that before, in journalism. When I tried to raise it with the editor, he took a hostile route. In fact, I started correcting their errors on their own website and my postings were deleted initially, although I think that theyâve been restored in recent weeks, possibly because they realise that everything we reported was accurate.
* Click here to read the âback storyâ and access links to all the Biznews.com coverage of the Belvedere saga.
