Belvedere Ponzi latest – Officially confirmed R4bn stolen from investors is tip of iceberg

At Biznews, 2015 will be remembered as the year of the Belvedere Ponzi scheme – a global network of financial fraud and deceit masterminded by South Africans Cobus Kellermann and David Cosgrove. On March 17, when David Marchant of Offshore Alert claimed Belvedere was a massive criminal enterprise, we did our own checking and quickly realised he was on the money. Following the publication of South African angled articles on Biznews, the site was briefly paralysed by a cyber attack. Then came the bullying attempts – heavy handed threats from SA heavyweight legal Werksmans which appears to have engineered the publication of articles taunting Biznews and Offshore Alert as sensationalist and irresponsible. Six months later with R4bn of investor money now officially confirmed as having gone missing and billions more unaccounted for, Belvedere has collapsed, exposed for the Ponzi scheme Marchant always claimed it was. In this special podcast he provides an update on the unraveling of a global network of fraud, fuelled by deceit, blatant lies and corrupt financial advisors. – Alec Hogg . Well, it's been a while since we've been able to catch up with David Marchant, the Editor and Owner of Offshore Alert. You might remember that on March the 17th, David published a big story on the Belvedere Management Company – an exposé, which has led to an unravelling of an empire built by two South Africans, Cobus Kellermann and David Cosgrove. David, from your perspective, you've really been getting your teeth into this story. It was a big one to start off with. Has it lived up to expectations (if you could put it that way) from a journalistic perspective?I'm not sure what the expectations were but since Offshore Alert exposed the group in March, it has collapsed in many different jurisdictions. In Mauritius, eight companies have been closed down by the local regulator. In Guernsey, three hedge fund companies have been closed down by the local regulator. In the Cayman Islands, one hedge fund company has been closed down. In Gibraltar, a company is in liquidation and more recently, in Anguilla in the Caribbean a company owned by one of Belvedere's administrators had regulatory action taken against it. I've been doing this for so long. When Offshore Alert exposes something it typically, quickly collapses and the Belvedere Group has followed suit.Is anything left?Yes, there are scraps here and there. I was actually reading the financial statement that's just been filed in England by one of Belvedere's British companies that's hanging on by its fingertips, so there are strands. This was so big. It had so many tentacles that it's quite difficult to close everything down.Read also: Belvedere: WSJ exposes Cosgrove link to US's most wanted financial criminalI remember when we last spoke; you said that these things don't always have a happy conclusion. In this instance, I can share with you that at least one person has been saved an enormous amount of money by your exposé. A lady who was about to give more money to David Cosgrove (she already lost $1m but she was going to put a lot more – her whole family fortune with it) and she passed on her thanks. I'm sure there might be others as well. Do most people who are affected by this kind of thing, stay hidden?I've investigated and exposed one investment fraud after another for a long time. I really don't get contact back much by victims. I do, occasionally. When we expose a fraud, the first reaction of victims is to deny that they're a victim. They just don't want to believe your information because to accept that your information is true is catastrophic for them because they have to accept that their investment is gone. Yet, you mention a lady. A peculiarity of my job is that the people who really should be thanking me left, right, and centre are potential/future victims. People whom, if we hadn't exposed the scheme and caused its collapse, they would have put money in there. Often, you don't even know who those people are. They don't even know who they are. Many people, who should thank me, don't even know they should thank me.David, it's been a long road in the last six months, starting with that initial exposé. From Biznews' perspective, we checked out your story and it certainly checked out here in South Africa. There were South Africans who were intimately involved. Do you know whether South African investors have been involved as well, or is this something where South Africans were the kingpins and they raised money elsewhere?I'm sure there were some South African investors. I don't have any names, but that's just common sense. This was a truly international group that was in part, run from South Africa. It's inconceivable to me that there were not South African investors. I'd just like to add one thing. All of this regulatory action has been taken against various companies. The amounts that are known to be lost, total approximately R4bn (that's the Rand equivalent of the Dollar, Euro, and Pound value of this amount) and that is probably a fraction of the true total. The amount of money that has already been established as having gone in and gone out is substantial. Clearly, within that, there are going to be South African victims without a doubt. Some of them may have invested in their own name or they may have invested through an offshore company.Typically, investments into these schemes…the promoters are looking to sell you anything they can so typically, they'll persuade you to set up an offshore company and the investment is made through an offshore company. That's typically how it works. A South African individual may not appear as a shareholder in his/her own name.Read also: Belvedere unravelling into a "huge collapsing scam"You say R4bn has been lost but it could only be a fraction. Is this the confirmed amount that's come from people like the auditors who've looked at the funds, and the regulators?Well, I'll just give you a few examples. BDO did an audit of the Four Elements Fund and they determined that €67m either likely, did not exist – this is money that appeared on the books – or was not likely to be recoverable. That's approximately R1bn there. Brighton SPC, which in our original exposé we called a Ponzi scheme and then your ridiculous news service in South Africa (Moneyweb), published a story saying 'the truth appears to be somewhat different to what appeared in Offshore Alert'. This wasn't attributed to anyone. This is Moneyweb's reporter, Patrick Cairns stating on his own behalf, that our allegation that Brighton SPC was a Ponzi scheme is 'hard to substantiate' and 'the truth appears to be somewhat different'. Well, Brighton SPC was subject to a liquidation application, quite recently, by the Cayman regulator. A forensic examination was conducted and the regulator concluded that it was, indeed, a Ponzi scheme and $83m was missing.Again, that's approximately R1bn, so that's a couple of billion there between the Four Elements and Brighton SPC. Then you had the CWN Group, which was £50m, which again, according to my calculations are approximately there or thereabout – R1bn, etcetera. The figures that I'm quoting come from (in one case) an auditor. In some cases, regulators and in other cases, what I know went into scheme and is, almost certainly, gone..Well, this is your game. This is an area where you focus on and clearly, if anyone can identify it, you can. In the past month though, there's been a fair amount of developments. Since we last spoke, the unravelling has continued but in the past month, the Cayman Island regulator has gotten involved. Was this to do with Brighton (the company you've just mentioned)?Yes. What happened was that the regulators in Mauritius had started to take action against the group, so the group moved one of its flagship funds (Kijani Commodity Fund) to the Cayman Islands because that fund was suspended in Mauritius so they just moved it to the Cayman Islands where it could continue, unsuspended. I hate to keep mentioning it but we reported this and Moneyweb did a story, calling into question the veracity of Kijani Commodity Fund – why it moved to the Cayman Islands and when it moved. It literally moved days after it was suspended in Mauritius but according to Moneyweb, this really wasn't the case and the move happened far removed from the regulatory action in Mauritius. 'They weren't linked and there were other reasons'. Completely ridiculous nonsense.Let's just hope that nobody invested on the strength of that reporter swallowing such a lot of nonsense. Just tell us a little bit about Kijani. It's a commodity fund. I remember looking at it in my research and at the time, it was 50 percent owned by Kellermann and Cosgrove so clearly, it's their fund. What exactly did it do? Everything was 50 percent-owned by Cosgrove and Kellermann because they sat at the top of this empire, which they co-owned. Another mysterious South African bought into it (a minority share, according to a Guernsey regulator). Kijani Commodity Fund was a commodity fund in name only. You have to bear in mind, Alec that this fund claimed to have double-digit annual returns. The investment trade media portrayed it as a very successful fund. We reported that it was a Ponzi scheme because it was obviously a Ponzi scheme. It took me three seconds of looking at its purported performance chart. It turns out, according to the Cayman regulator, that it hadn't conducted a single trade in commodities or anything else, contrary to its prospectors. What happened was that it literally raised money claiming it was investing in commodities. It didn't invest in a single commodity.It didn't do any commodity trading and the money was simply transferred to insiders to presumably, live the good life with such a level of crudity that we're talking about here that in this case, with Kijani Commodity Fund approximately $80m (so about R1bn) went in and then the money was just divvied up to the insiders. Presumably, to buy expensive cars, which I understand Cobus Kellermann liked. There's a guy in Gibraltar who bought himself a super-yacht. That's the level of Mickey Mouse fraud, which we're talking about here. There was almost no pretention of having any legitimate activity. It was just money in, money out.Read also: Belvedere: A huge collapsing scam, with online document shredding tooThat's extraordinary. Just to unpack this again; money came in. They told the public (through their marketing agents) that they'd been performing at a certain level but in fact, no trades were done. It was all fictitious.It was all fictitious and the Nett Asset Values were false. There's a company in the British Virgin Islands – Drake Fund Advisors – that when Kijani Commodity Fund, which had never conducted a single trade, moved from Mauritius to the Cayman Islands. Drake Fund Advisors of the BBI was appointed administrator. I actually have a copy of the signed administration agreement and the administration agreement was dated July 2014 (I think), so I think that Brighton SPC was formed in May 2014. They immediately appointed Drake Fund Advisors to administer Brighton SPC, which had sub-funds. One of which, was the Kijani Commodity Fund. I have a copy of the administration agreement signed by Nicolaas Faure who went to Stellenbosch University where [inaudible 15:06] I might add. I have a copy of this agreement and as I said, it's July 2014.Yet Moneyweb (and I hate to harp on this although it's thoroughly deserved) published a story, basically saying 'oh no. They weren't administrator until February/March of 2015'. They've been telling people that Drake Fund Advisors were partly responsible for bringing this fraud to light and it's all utter nonsense. The fake NAV's for Brighton SPC and Kijani Commodity Fund were in part, distributed by Drake Fund Advisors from the BBI. Drake Fund Advisors recently had their license in another Caribbean country (Anguilla) conditionally suspended because of our exposé into the Belvedere Group.David, you have nothing against South African but it certainly looks as though you've uncovered a hornet's nest of people from this country. Is it as bad as it looks – the fraud that has been perpetrated here?What is the South African involvement? Kellermann basically owned 50 percent and I think it was reduced to 40 percent, subsequently of the overall head company. He co-owned that with David Cosgrove who's an Irish national, but I believe he was at least partly, a resident in South Africa. There's a significant South African involvement here, but it's an international scandal. Anything involving a lot of money is typically international – anything of this size. South Africa certainly has to bear part of the spotlight over this. I can't really see any evidence that the regulators in South Africa are doing anything unless I'm missing it, but I haven't really read stories where they've done anything in particular other than maybe cooperate with the investigations of other regulators.We are waiting for a report from the Financial Services Board here. It was due at the end of May but I guess they've found more. In September, two more Belvedere funds closed in Mauritius. Their Anguilla base, the Drake Incubator Fund, was suspended. It does appear as though the wheels of justice in this regard, are grinding slowly but they certainly are grinding. Where does it all end?I think that what will happen is that the people involved will simply move on to other schemes. I'm sure they're already moving on to other schemes. It really is up to Offshore Alert to track them down in their new ventures and expose those. The regulators like to shroud everything in secrecy so typically, when they do investigations they produce reports. Those reports tend to stay private unless they're leaked, so the investing public doesn't really know who's been accused of what, what evidence there is against somebody, and who they should be avoiding in the future and it lets them just move on to new schemes. It also enables them to defraud new victims. The reason why these regulatory reports are kept secret is really, for liability purposes. Regulators don't want to be sued. This is where Offshore Alert is different to other organisations. I don't care about being sued.I'm prepared to bear that risk because it's worth it to me. I have the satisfaction from exposing major frauds like this and I'm actually doing a public service. I'm helping prevent future/potential victims from having their lives ruined. Their lives are indeed, ruined. If you lose your savings, your life is ruined.Read also: Guernsey Financial Regulator: How Kellermann manipulated Belvedere funds' NAVsDavid, I hear what you say about the regulators, but I'd like to bounce something else off you. This morning, we got the news that the former President of the United Nations – and it doesn't get much higher than that – was taking money from the Chinese to ensure that certain buildings were built where these Chinese businessmen wanted them built. One-point-three-million is perhaps only the tip of the iceberg. If it can happen there, surely there would be an incentive for some regulator to maybe, do the same kind of thing. Does that not suggest that the transparency of these processes is now in the public interest?Well, the person you mentioned (John Ash) is from Antigua. The Antigua Chief Financial Regulator at that time was implicated in the Alan Stanford multi-billion Dollar Ponzi scheme. When Alan Stanford was operating in Antigua, the Chief Regulator took bribes from Alan Stanford. Listen, it's a common misconception among the investing public that a scheme cannot be fraudulent because it's regulated and if it were fraudulent, the regulator would have closed it down. Life doesn't work like that. You cannot place much faith (maybe even any faith) in some jurisdictions, regulators, law enforcement, or authorities in general to look after your interests. Only you could look after your interests. There are regulators who're being bribed left, right, and centre including in the Caribbean where John Ash was based. Bribes are being paid left, right, and centre and that's why World Cups are awarded to Qatar, Russia, and – dare I say it – South Africa.Bio pharm has had a fantastic run recently. Belvedere also saw the bubble and created a couple of companies in that area. One of them is called Fulhold Pharma.Well, it's so funny you should mention that Alec, because earlier in this conversation I said I was looking at a financial statement earlier this morning, which by the way was about 4:00am my time. That's how early I start work. That was in one of Belvedere's bio-pharmaceutical South African base groups. I was looking at their latest financials, which have just been filed with Company House in Britain and virtually all of their assets (from memory); they said they had £7m or £8m of assets. Virtually the entire amount was in something called goodwill. It wasn't tangible. It was, quite frankly a fabricated asset, which some arbitrary value was assigned to.You fabricate the goodwill or you just put it into your balance sheet and then tell your investors (in the same way Kijani did) that your investment is doing well. On the other hand, we're enjoying our yachts.Belvedere specialised in creating the illusion of financial success and substantial assets. It was an illusion so when Belvedere claims to have $16bn (which, I think is just over R200bn) of assets under administration, management, or advisory; that figure is undoubtedly, not accurate. It's an illusion. You can't accept that as fact. They created the illusion of over R200bn of assets. However, if you heavily discount that/substantially discount that; at the end of the day, with Belvedere you're probably talking at least R10bn/R15bn of real fraud.Of which, four has already been exposed. David, from your personal perspective, you're moving on to a conference in London. In fact, one of your fans suggested that I get there. That's at the end of November. Who'd come to these conferences? Is it regulators? Do they come and pay attention, to see what you've uncovered?We get a very eclectic group of people who are involved in different aspects of the highest value international finance. We get buyers of financial products and services, investigators of those services and products, and sellers. We get people who hate Offshore Alert. Just to give you an example, I did a blog recently where I called an offshore attorney 'a leading candidate for numbnut of the year' and you'd think this guy would want nothing to do with me. Well, he signed up to attend our conference in London.I hope you have a big bodyguard.It's quite interesting. With Offshore Alert, even they people who hate us respect us because even though they might be the target of an investigation, they know that what we wrote is true. They just don't like the fact that we publish that but because it's true, they have to respect it.Are you going to be unpacking the Belvedere story at your London conference?I'll be mentioning it. I'm participating in a session on how to detect investment fraud. You have to bear in mind that when I exposed this to begin with… For example, with Kijani Commodity Fund, I just looked at their purported performance chart and it was a diagonal line trending upwards, with virtually no variation. That alone was the basis for me reporting that it was a Ponzi scheme. How do you know something is a car? You're walking down the street and you see this metal structure with four wheels, four tyres, and a steering wheel and you automatically know that's a car. That's how easy it is to detect a Ponzi scheme. With zero exceptions, any purported performance chart that has a diagonal line trending upwards with little or no variation is a Ponzi scheme. You don't need to know the backgrounds of the people involved. You don't need to read the prospectus.You need to know nothing else. It doesn't matter whether the Queen of England is the Chairman of the Board or whether the President of the United States is the CEO. It doesn't matter. It's a Ponzi scheme. Anyone listening to this…if they take nothing else away from this interview always remember that. It doesn't matter how persuasive the salesperson speaking to you is. It doesn't matter how glossy the paper is in the promotional brochure. It doesn't matter what else is written in that brochure. Fast-forward to the paragraph called 'performance chart', take a look at it and if it's a diagonal line trending upward with little or no variation, just say 'thank you very much but I'm not interested'.David Marchant is the Proprietor of Offshore Alert and if you want to go along to that conference, it's in London (23rd to the 24th of November 2015). It should be fascinating. Thank you, David. As always, lovely chatting with you.Okay. All the best. Bye.

Belvedere Ponzi latest – Officially confirmed R4bn stolen from investors is tip of iceberg

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