Damning High Court ruling labels platform’s operations illegal.
The Western Cape High Court has placed CFD trading platform Banxso under provisional liquidation. Judge André le Grange handed down a damning judgment that described the company as operating a fraudulent and predatory business model that preyed on vulnerable investors.
The application was brought by 60-year-old pensioner Carol Margaret Wentzel, who lost more than R500 000 of her retirement savings through Banxso’s trading platform.
Wentzel argued that Banxso’s activities were unlawful and void under South African law, and that the company was a criminal enterprise masquerading as a financial services provider.
Several other individuals who lost money at the hands of Banxso also joined the application.
In his ruling, Judge Le Grange wrote: “On a conspectus of all the evidence, I am satisfied that Wentzel has established on a prima facie basis that Banxso does not operate within the confines of the law, and its business model is illegal.”
The judgment follows the Financial Sector Conduct Authority’s (FSCA) permanent withdrawal of Banxso’s financial services licence in July. The regulator had provisionally suspended the licence in October 2024 after a flood of investor complaints.
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According to court papers, more than 7 000 investors may have claims against the company. Many were drawn in by fake social media advertisements in which prominent figures such as Johann Rupert, Patrice Motsepe, Elon Musk and Nicky Oppenheimer were falsely portrayed as endorsing trading platforms which promised extraordinary returns – in some cases claiming investors could turn R4 700 into more than R500 000 in monthly profits.
Banxso has already indicated that it will appeal the ruling. In a press statement, the company “firmly disagrees with the ruling and is treating this matter with utmost urgency, immediately pursuing all legal remedies, including appeals.”
“We will do everything necessary to secure a just and equitable outcome and prevent the dissipation of client funds,” added Banxso.
The order is provisional. The case will return to court later this year to determine whether Banxso will be placed into final liquidation.
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Banxso performed the functions of a liquidity provider
In one of the most striking findings, Judge André le Grange rejected Banxso’s claim that any profits from client losses lay solely with offshore “liquidity providers”.
A liquidity provider is ordinarily an institution or firm that facilitates trading by standing between buyers and sellers, quoting prices and absorbing risk so that markets remain liquid. When clients lose money, the liquidity provider often profits.
The court found that Banxso itself effectively performed the functions of a liquidity provider, despite naming several offshore entities in that role. It further emerged that Banxso’s owner, Harel Sekler, also owned Flamingo Clearing House (FCH), a Comoros-registered company listed as one of the liquidity providers.
“The losses of Banxso’s clients are the profit of an LP (liquidity provider). Banxso has acquired and transferred cryptocurrency to FCH in the amount of R319 985 959.00 from 17 April 2023 to 29 December 2023. For 2024, a further total of R672 192 435 was transferred in this manner. This equates to a handsome profit of just over R990 million that was pocketed from the misfortunes of Banxso’s clients. In addition, further deposits by investors found their way into the bank accounts of AheadStart and Volor Vault, which remain unexplained by Banxso.”
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Banxso claims are ‘scandalous, vexatious or irrelevant’
The judgment also addressed Banxso’s claims regarding the applicant’s attorneys, Mostert & Bosman (M&B). In court papers, Banxso argued that the attorneys were driving the liquidation application for their own gain and accused them of touting by setting up a website for other victims to register. The applicants successfully requested that these statements be struck out.
Judge Le Grange found Banxso’s claims “scandalous, vexatious or irrelevant”. The Judge further stated that the allegations were “reckless and offensive generalisations which should find no space in a proper court process”.
The court found the touting allegations unpersuasive. The judge noted that the attorneys had created a website to “enquire if there are clients of Banxso that had similar experiences [to] Wentzel”. The court found no evidence that the attorneys had improperly solicited business or promised to recover money upon registration.
This article was republished from Moneyweb. Read the original here.