Investigators begin to unravel Ponzi scheme

A High Court order has frozen R43-million linked to the Ponzi scheme allegedly headed by Barry Tannenbaum. On Friday, the High Court in Pretoria granted the preservation order to the National Prosecuting Authority's asset forfeiture unit in terms of the Prevention of Organised Crime Act, NPA spokesperson Mthunzi Mhaga said in a statement. "The order freezes an estimated amount of just less than R44-million held in two bank accounts in the name of Darryl Leigh and the Darryl Leigh Trust," he said

Tannenbaum, whose estate was provisionally sequestrated in June, was a trustee of the Darryl Leigh Trust. Legal adviser Darryl Leigh and attorney Dean Rees are accused of recruiting investors for the scheme. Mhaga said evidence in court appeared to indicate that the money in the now frozen accounts was the proceeds of the Ponzi scheme. Rather than distributing actual profits, a Ponzi scheme uses funds from investors to pay generous "returns" to other investors.

Mhaga said it appeared that the frozen accounts were used to launder some of the scheme's funds. "It is alleged that as a result of this Ponzi scheme nearly R97-million was transferred from Tannenbaum private accounts to those of Leigh," he said. Mhaga said money invested was allegedly transferred to Tannenbaum's personal accounts. Some was then moved to Leigh's personal account and channelled from there to his trust account. He alleged that at least R96 263 022 was transferred from Tannenbaum's personal bank accounts in South Africa to Leigh's personal account between October 2006 and November 2008. "Also, between October 2006 and June 2009, 23 deposits were made into the Darryl Leigh Trust bank account, amounting to R51 601 799." Of the 23 deposits, 17 deposits (totalling R39 298 365) was money transferred from Tannenbaum's two personal accounts to Leigh's personal account, then moved to the Darryl Leigh trust account.

Mhaga said the NPA, the police, the Financial Intelligence Centre, the South African Revenue Service and the South African Reserve Bank were engaged in a "massive" joint effort to investigate the alleged Ponzi scheme. Earlier this month, Leigh's assets, including two Lamborghinis and three properties, were seized. This asset seizure application was reportedly brought by Johannesburg businessman Christopher Leppan, who also brought an application in June which resulted in the provisional sequestration of Tannenbaum's estate in South Africa. Leppan claimed he was owed R2,88-million.

Mhaga said Ponzi schemes usually had four characteristics: the bait, the hook, the line and the sinker. The bait was promises of high returns and was used to lure investors; the hook was a complicated, but fictitious business model used to justify the promised returns; the line was the standing in society of the fraudster; and the sinker, which usually ended the scheme, was absence or paucity of commercial activity.

Source: Mail & Guardian