Beware of these Investments

Time and again people fall for investments “that sound too good to be true”. We don’t know whether it is greed, ignorance or the lack of financial education that leads to people falling for “false” investments.

Recently, one of our Directors were approached by a promoter of one of these investment schemes that offer very attractive return rates, 8% per week (or 416% per annum) to be exact. We cannot disclose the name of the investment scheme at this stage, since we are on the verge of reporting this investment scheme to the Financial Sector Conduct Authority (“FSCA”).

How to Spot a “Scam” Investment

In times of financial uncertainty, many investment opportunities pop up, which later prove to be nothing but a scam, taking large sums of money from investors, most of whom will probably never see a cent of their investment again, let alone any return thereon. However, to the few who will read this article, there might be a way to get at least some of your money back.

But first, how can you spot and avoid these types of investments?

The Consumer Protection Act 68 of 2008 (“CPA”) came to the rescue of many people, however, people are unaware of the provisions of the CPA and therefore they are ignorant of the clear warnings contained therein.

Section 43 of the CPA deals with Pyramid and related Schemes. Section 43(2) provides as follows:

“A person must not directly or indirectly promote, or knowingly join, enter or participate in a multiplication scheme, a pyramid scheme or chain letter scheme.”.

For purposes of this article, we will focus on Multiplication Schemes, since these “investments” are currently popping up everywhere. And with the current economic climate as a result of the Covid-19 pandemic, people are financially vulnerable or desperate, and invest in these schemes with the hope of improving their financial position.

Section 43(3) defines a Multiplication Scheme as a scheme offering, promoting or guaranteeing an effective annual interest rate of at least 20% above the REPO rate as at the date of the investment.

As published by Moneyweb, Mirror Trading International (Pty) Ltd for example, promised investors returns of at least 10% per month. This equates to 120% per annum, while 20% above the current Repo Rate is only 23.5% per annum. Any returns offered in excess of 23.5% per annum, constitutes a Multiplication Scheme in terms of the CPA, and promoting, joining, entering or participating in such schemes are prohibited.

In August 2020, the FSCA issued a warning against investing in Mirror Trading International (Pty) Ltd, however, had the people who already invested just read Section 43 of the CPA before they invested, many tears could have been spared.

Another Multiplication Scheme, Finalmente Global (Pty) Ltd recently suspended their website with the following notice to its members:

Dear Members,

It is with heavy heart that we have to inform you that due to the demise of MTI, we too, have lost a substantial amount of money, not only due to the investment we have/had with them but also the revenue stream of advertising.

As most of you know our business was advertising based, MTI being one of our largest clients in that aspect of our business. Due to the false impression of our association with MTI a large portion of our other clients have also cancelled our mandate.

Due to this we have lost a substantial portion of our income, as a result we are no longer lucrative enough to continue trading and we have had to retrench our staff and suspend all further trade.

This website will be suspended for an indefinite period. We will keep you advised of any further developments.

We apologise for any inconvenience caused.

With regret,
Management Finalmente Global (Pty) Ltd

We fail to understand why Finalmente Global (Pty) Ltd has to suspend trading as a result of the fall of Mirror Trading International (Pty) Ltd, if the latter was one of their largest clients. If this is true, the investors’ investments in Mirror Trading International (Pty) Ltd would be “safely invested” in Finalmente Global (Pty) Ltd, who offered extremely lucrative returns on investments. Here is an extract from their website before it was suspended.

Something about the relationship between Mirror Trading International (Pty) Ltd and Finalmente Global (Pty) Ltd doesn’t make sense, but then again, it wouldn’t make sense if it isn’t the truth. Only time will reveal the truth behind this relationship, if any.

The bottom line is, these companies make theses false investments appear attractive, by offering unusually high return rates. 23.5% per annum, equates to just under 2% per month which, to the greedy or desperate person, is not attractive. But at returns of 100%, 200% or 500+% per annum, people will borrow money from banks to invest, since the returns would cover the interest and still yield extremely attractive returns.

We urge you not to fall for these unlawful Multiplication Schemes. Not only because the CPA prohibits the participation thereof, but you are almost guaranteed to lose (instead of make) money.

Relief for Victims?

These schemes usually end up being liquidated. This, in short, means that all the investors who received returns will have to pay such returns back, and once all the assets are reduced to cash, the distributable monies will be distributed amongst the investors, pro-rata to their respective investments.

A liquidation process, although being the only end to such schemes, is almost always unfavourable to all the creditors (investors), since some will have to pay money back, while the others will not recover their initial investment.

But where did the balance go that now represents the shortfall? Salaries, rent, other expenses, etc. One large expense that cannot be left out of sight, is the director’s salaries and other financial benefits. These schemes are usually only to the benefit of the directors.

Victims of these schemes are entitled to pursue legal action against the directors of these schemes for any loss after distribution following the liquidation process, or in some instances, even before the liquidation process started. Since the conduct of the company is unlawful, the directors of the company are liable, together with the company, to the creditors of the company.


People complain about being “scammed” into these investments, but they were not “scammed”. They were either desperate, greedy or ignorant of the warning signs. The warning signs are right in front of their eyes, they just need to read, or follow the age-old principle: “if it sounds too good to be true, is usually is”.

Despite our harsh warnings contained herein, we will not judge you if you fell victim to one of these schemes. Instead, we will assist you in recovering as much of your initial investment as possible. However, please keep our harsh warning in mind for the future.