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Cape Town – The mastermind behind the Defencex “Ponzi scheme” on Saturday tried to allay investors’ fears at a brief appearance at a Motivational/Feelgood Day (sic) meeting at Wits University.
Chris Walker, the sole member of the close corporation Defencex, a trading name for Net Income Solutions, told over a thousand “investors” that their money had been frozen and that no withdrawals from the scheme would be possible “until the investigation is complete”, reported a Moneyweb reporter who gained access to the closed meeting.
Attendees reportedly paid R1 000 a ticket to hear Walker’s five-minute explanation of exactly what had gone wrong with his 2%-a-day investment initiative.
But it will take more than just facing a handful of investors who invested up to R500m in the alleged scheme.
Investors were up in arms when news broke that the bank account of Net Income Solutions had been frozen on February 28. There was R320m in the Standard Bank account at the time.
According to Gavin Came, chairperson of the Financial Intermediary Association of South Africa, Walker can only soothe investor fears by appearing at the court return date on March 26.
He said the only institutions authorised to take deposits are banks, collective investment schemes (unit trusts) and stock broking firms through stock broking accounts.
“With Defencex, Walker has been taking deposits from the public in breach of the banking laws. If he can convince the court on March 26 that he is not a bank, the scheme could be in business again, which is unlikely.”
Defencex promised investors some 2% per day on investments of five-month duration subject to a complicated points-based assessment system. They could enhance these returns by earning commission on the amounts invested by people they in turn introduced to the scheme.
At the end of last month, the Western Cape High Court ordered the bank accounts connected to the scheme be frozen after the Registrar of Banks applied to the court for an interim order interdicting Net Income Solutions/Defencex from continuing its deposit-taking activities.
Thousands of people had bought into the promise of a daily return of 2% on R100 investment. Defencex sells “points” for R100 apiece. These points “earn” 2%, or R2, a day for 75 days, at which point they can be withdrawn.
Came said the worrying trend emerging from this is that participation in the scheme had increasingly been linked to the unsecured borrowing market, where some investors could even have used their overdrafts to “invest” in the scheme.
Another worry is the level of financial literacy of investors, judging from the posts on Facebook and Twitter. “It is difficult for the ordinary person to pick up a pyramid or Ponzi scheme, but financial intermediaries are equipped to do so.
“And extra protection for the investor is that the intermediary can be held liable for inappropriate advice and be referred to the ombud,” said Came.
Defencex’s website redirects to an internet page called recycle4dollars which introduces visitors to Emotional Freedom Techniques (Meridian tapping).
Further browsing of the site brings up a Financial Opportunity which outlines how Defencex works and the navigation button Getting Started instructs investors how to deposit money.
The contact email is a g-mail address.
It goes on to encourage clients to "invest their money for cash-flow as opposed to invest for capital gains. Cash-flow investing is the best because you enjoy your account returns for a lifetime," the company says.
Although the Defencex website is still there, members have vented their frustration that they cannot enter the Member login.
"Guys wht is hapening with defencex webside i cnt login," (sic) one member said on Facebook.
"does anybody have any new info on what is happening on Defecex. Can't even get into the website," (sic) another said.
However, many investors still back Walker and when he asked for it at Saturday’s meeting, support was clearly granted.
Moneyweb reported that Walker said he is going through a difficult time. “I need to know that I have your support,” which was clearly granted, according to the Moneyweb report.
Almost 4 000 people also signed an online petition backing Walker.
Meanwhile, the SA Reserve Bank has asked auditors PwC to investigate whether Defencex, Cycle4Dollars, Net Income Solutions and its director Chris Walker are contravening the Banks Act, Moneyweb reported.
According to affidavits, large sums of money were deposited into the accounts of Net Income Solutions, none of which were reinvested by Walker.
According to Moneyweb, Walker, 46, is no stranger to controversy. His previous scheme, Gold Charity Fund Investments, was reportedly declared an unfair business practice back in 2002.
Walker was accused of operating a pyramid scheme which abused the name and image of former president Nelson Mandela.
Came warned South Africans against get rich-quick schemes.
“Warning signs that you are dealing with a Ponzi scheme are that the promised returns offered are way over those achieved in bank deposits, unit trusts and other regulated savings and investment products,” said Came.
Chris Walker, the sole member of the close corporation Defencex, a trading name for Net Income Solutions, told over a thousand “investors” that their money had been frozen and that no withdrawals from the scheme would be possible “until the investigation is complete”, reported a Moneyweb reporter who gained access to the closed meeting.
Attendees reportedly paid R1 000 a ticket to hear Walker’s five-minute explanation of exactly what had gone wrong with his 2%-a-day investment initiative.
But it will take more than just facing a handful of investors who invested up to R500m in the alleged scheme.
Investors were up in arms when news broke that the bank account of Net Income Solutions had been frozen on February 28. There was R320m in the Standard Bank account at the time.
According to Gavin Came, chairperson of the Financial Intermediary Association of South Africa, Walker can only soothe investor fears by appearing at the court return date on March 26.
He said the only institutions authorised to take deposits are banks, collective investment schemes (unit trusts) and stock broking firms through stock broking accounts.
“With Defencex, Walker has been taking deposits from the public in breach of the banking laws. If he can convince the court on March 26 that he is not a bank, the scheme could be in business again, which is unlikely.”
Defencex promised investors some 2% per day on investments of five-month duration subject to a complicated points-based assessment system. They could enhance these returns by earning commission on the amounts invested by people they in turn introduced to the scheme.
At the end of last month, the Western Cape High Court ordered the bank accounts connected to the scheme be frozen after the Registrar of Banks applied to the court for an interim order interdicting Net Income Solutions/Defencex from continuing its deposit-taking activities.
Thousands of people had bought into the promise of a daily return of 2% on R100 investment. Defencex sells “points” for R100 apiece. These points “earn” 2%, or R2, a day for 75 days, at which point they can be withdrawn.
Came said the worrying trend emerging from this is that participation in the scheme had increasingly been linked to the unsecured borrowing market, where some investors could even have used their overdrafts to “invest” in the scheme.
Another worry is the level of financial literacy of investors, judging from the posts on Facebook and Twitter. “It is difficult for the ordinary person to pick up a pyramid or Ponzi scheme, but financial intermediaries are equipped to do so.
“And extra protection for the investor is that the intermediary can be held liable for inappropriate advice and be referred to the ombud,” said Came.
Defencex’s website redirects to an internet page called recycle4dollars which introduces visitors to Emotional Freedom Techniques (Meridian tapping).
Further browsing of the site brings up a Financial Opportunity which outlines how Defencex works and the navigation button Getting Started instructs investors how to deposit money.
The contact email is a g-mail address.
Instructions on how to deposit money into the scheme. (Defencex website)
Defencex punts itself as an online investment company that allows you to "grow your profits by learning to compound your daily profits". It goes on to encourage clients to "invest their money for cash-flow as opposed to invest for capital gains. Cash-flow investing is the best because you enjoy your account returns for a lifetime," the company says.
Although the Defencex website is still there, members have vented their frustration that they cannot enter the Member login.
"Guys wht is hapening with defencex webside i cnt login," (sic) one member said on Facebook.
"does anybody have any new info on what is happening on Defecex. Can't even get into the website," (sic) another said.
However, many investors still back Walker and when he asked for it at Saturday’s meeting, support was clearly granted.
Moneyweb reported that Walker said he is going through a difficult time. “I need to know that I have your support,” which was clearly granted, according to the Moneyweb report.
Almost 4 000 people also signed an online petition backing Walker.
Meanwhile, the SA Reserve Bank has asked auditors PwC to investigate whether Defencex, Cycle4Dollars, Net Income Solutions and its director Chris Walker are contravening the Banks Act, Moneyweb reported.
According to affidavits, large sums of money were deposited into the accounts of Net Income Solutions, none of which were reinvested by Walker.
According to Moneyweb, Walker, 46, is no stranger to controversy. His previous scheme, Gold Charity Fund Investments, was reportedly declared an unfair business practice back in 2002.
Walker was accused of operating a pyramid scheme which abused the name and image of former president Nelson Mandela.
Came warned South Africans against get rich-quick schemes.
“Warning signs that you are dealing with a Ponzi scheme are that the promised returns offered are way over those achieved in bank deposits, unit trusts and other regulated savings and investment products,” said Came.
