Collapsed Forex Dealer Tries To Go On Trading

by Leroy Baker, Tax-News.com, New York

12 May 2005

Astonishingly, Leaderguard Spot Forex, which lost 95% of the $59m placed with it by nearly 2,000 South African investors, is asking the Mauritius Financial Services Commission and the courts to allow it to continue to trade the remaining $3.5m left in the fund in an attempt to recoup the lost money.

Following an announcement in April that the FSC had suspended the Category 1 Global Business Licence of Leaderguard Spot Forex Limited with immediate effect, the company was put under judicial administration.

Leaderguard Spot Forex was licensed as an asset management company and was using its sister company, Leaderguard Securities (Pty), as a marketing arm to develop a wide client base in South Africa, Botswana and Swaziland, primarily through a network of investment consultants and brokers.

South Africa's Forex Investment Association says a miracle of biblical proportions would be required for the scheme to work. The Mauritius Court appointed Mr Ziyad Bundhun, Chartered Accountant, as Manager of the Company, and he says that the compromise, which has been prepared by a South African consultancy named Towergate, had been submitted to the Financial Services Commission, after which it would be put to the court. "After that, investors will have the choice to vote on this."

Bundhun said the compromise "would allow investors to recover at least part of the loss," but makes no promises that losses will be recouped. Someone would win, though: Towergate estimates the costs of judicial management to be about $60,000 a month, or $720,000 a year. The ownership of Towergate is unclear; however, in May, 2004, the consultancy described Leaderguard as “probably the leading Spot Forex Company in South Africa, and is at the leading edge of compliance, not only within South African Statutory requirements, but international as well.”

Leaderguard's managers are said to have taken an enormous management fee of 1.8% of its assets each month.

Major questions remain unanswered about the management of Leaderguard, its relationship to Towergate, the company's auditors, its directors, who include Jacobus Venter, Warren Luyt and Stephanus Pretorius, and its 'Risk Manager', Renso du Plessis, who is alleged to have been connected with a previous scheme which lost its investors millions.

The Forex Investment Association is damning about the new proposal, saying it is based on the unlikely scenario that Leaderguard would be able to make returns of 1,570% to recoup its losses. It said investors should get legal and investment advice and warned against unrealistic expectations. "The only conclusion the Forex Investment Association can make from what it heard was that unrealistic expectations are being entertained and ... brokers and investors should not consider the proposed compromise to change this situation," it said.

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