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IOL News
6 days ago
- Business
- IOL News
The Liquidation Cartel: How MTI's R450 Million Vanishing Act Previews Banxso's Fate
With Judge Le Grange's ruling imminent, Banxso clients fear a repeat of the MTI disaster, where the legal system prioritises profits over justice, leaving ordinary South Africans in financial despair. Image: IOL / Ron AI The stage is set for another potential South African liquidation tragedy. As creditors wait for Judge Le Grange to deliver judgment in a case that could seal the fate of thousands of Banxso clients the anxiety amongst clients is growing. The precedent is terrifying: Mirror Trading International creditors have waited four years for a single cent while liquidators Bester and Van Rooyen have pocketed millions each, and law firm Mostert & Bosman extracted nearly R25 million in fees. Now the same players are circling Banxso, having already rejected a R57 million settlement that would have guaranteed 100% creditor payouts to the liquidation applicants. The message is clear: why settle for full creditor recovery when prolonged liquidation proceedings generate far more lucrative professional fees? How R1.1 Billion Became R627 Million The Mirror Trading International collapse exposes the brutal mathematics of South Africa's liquidation industry. When liquidators recovered 1,280 Bitcoin worth approximately R1.1 billion in 2021, creditors held hope for meaningful recovery. Four years later, the estate has mysteriously shrunk to R627 million, leaving R450 million spent and not a single creditor payment made. The June 2023 liquidation and distribution account reveals the shocking scale of professional extraction. From an estate balance of R803 million at the time of the report being published there was already an amount of around R297,000,000 spent over two and a half years, eight liquidators claimed R138.5 million in fees while creditors received nothing. Masters' fees consumed R275,000, with the South African Revenue Service claiming a staggering R283 million. The remainder has vanished into legal fees and administrative costs, yet not one cent has reached the victims whose investments funded this professional feast. The mathematics of destruction become even more damning when considering lost investment returns. The R1.1 billion recovered in 2021 should have generated substantial interest over four years of liquidation proceedings. Conservative investment returns of 8% annually would have added over R400 million to the estate. Instead, the current R627 million balance suggests this potential growth has also vanished into the professional fee vortex, representing another layer of value destruction that creditors will never recover. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ The disappearing funds tell a damning story. Administrative costs have consumed the estate like acid through metal, devouring not only the principal amount but the investment returns that could have significantly improved creditor recoveries. Professional fees flow freely while creditors subsist on empty promises. The Western Cape High Court declared MTI an unlawful Ponzi scheme in 2023, yet the only people profiting from this designation are the very professionals appointed to serve victim interests. Most cruelly, liquidators promised creditors a second liquidation and distribution account in 2024 that would finally deliver payments. Industry whispers suggested a special dividend of 10 cents per rand of claimed amounts. That promise evaporated with silence taking its place as many creditors now bemoan the lack of transparency and non-existent communications on the matter from the liquidators, leaving creditors with nothing but the bitter taste of false hope while professional fees continued accumulating. A senior insolvency practitioner, speaking anonymously for fear of industry retaliation, revealed the ugly truth: "This has become the perfect legal heist. You seize control of massive estates, generate astronomical fees through manufactured complexity, drag proceedings across years, and by the time creditors realise the con, their money has been professionally laundered into legal accounts." Banxso, The Sequel Nobody Wanted History repeats with mechanical precision in the Banxso liquidation. When stakeholders offered R57 million in security to guarantee full creditor payouts for the liquidation applicants, Mostert & Bosman rejected the proposal without hesitation. The law firm allegedly withheld news of this settlement from clients, who discovered the offer through media reports rather than their supposed legal representatives. Judge Le Grange himself highlighted the matter during the application hearing remarking that it made no sense for a creditor to turn down a 100% offer in favour of long, drawn out and expensive legal proceedings that would surely end up with the same alleged creditor receiving 10 – 15 cents on the Rand in a best-case scenario. A forensic accountant with two decades of corporate insolvency experience explained the perverse dynamics: "These liquidations have transformed into wealth destruction machines. Not only do they consume principal through manufactured legal complexity, but they obliterate the investment returns that should compound over time. The R1.1 billion recovered in 2021 could have grown to R1.5 billion through conservative investments. Instead, it has shrunk to R627 million while generating massive professional fees. This represents systematic value destruction disguised as estate administration." Judge Le Grange raised pointed questions during May hearings about a website promoting Bester and Van Rooyen as preferred liquidators before the application had even been heard by the courts, asking directly and not receiving any substantial answer as to why this would not constitute touting in its worst form. The coordination suggests an orchestrated campaign that may violate professional conduct standards. A Verdict That Could Doom Thousands Judge Le Grange faces a critical decision that will determine whether Banxso clients receive their funds or feed the liquidation machine. The contrast could not be starker. Approving forced liquidation consigns clients to the MTI fate: years of waiting while professionals extract maximum fees from dwindling assets. The human cost of this decision extends far beyond financial statements. Banxso clients represent ordinary South Africans whose savings, retirement funds, and family security hang in the balance. One investor, who invested R150,000 captured the desperation: "If Banxso wins its case, I can access my money immediately. These liquidators see only the profits they can make from forcing this liquidation through, regardless of what happens to us." An MTI victim whose pension fund vanished into legal fees painted the horrific reality: "Four years of watching lawyers grow rich while I struggle with rent payments. They stole our money twice, first the original scammers, then the professionals meant to protect us. The system is designed to destroy creditors." David Versus the Legal Goliath Unlike MTI's passive collapse, Banxso stakeholders have mounted unprecedented resistance against regulatory and legal pressure. While most companies capitulate when faced with FSCA action, Banxso directors are challenging the regulator at every turn, including now preparing to take the authority to tribunal to overturn the final removal of their Financial Services Provider licence. This defiance represents more than corporate stubbornness. Banxso management recognises that surrendering to the liquidation cartel means abandoning their clients to systematic wealth extraction by professional services. Their R57 million settlement offer, which excluded the large sums held under court order in their bank accounts, demonstrates genuine commitment to creditor protection rather than capitulation to legal machinery designed to enrich lawyers and liquidators. A retired commercial lawyer with 40 years' experience described Banxso's resistance as extraordinary: "Most companies fold immediately when liquidation proceedings begin because fighting the system is expensive and usually futile. Banxso's willingness to challenge both the FSCA and liquidation applicants shows they understand what their clients face if this process continues." The company's tribunal challenge against the FSCA represents a broader fight against regulatory overreach that enables liquidation abuse. By freezing Banxso funds while failing to enforce court orders for their release, the FSCA created the perfect environment for professional fee accumulation at creditor expense. The Professionals Always Win Industry insiders describe a deliberate methodology perfected through countless liquidations. Early settlement offers that benefit creditors face immediate rejection. Proceedings stretch across years through manufactured legal complexity. Friendly professional services receive appointments to maximise fee extraction. Estate assets disappear through administrative costs while creditors receive blame for poor market conditions affecting recovery rates. The pattern extends beyond individual cases into systemic dysfunction. South Africa's liquidation framework has evolved into a sophisticated mechanism where liquidators receive guaranteed payment regardless of creditor outcomes, law firms bill unlimited hours with minimal oversight, administrative costs consistently exceed creditor recoveries, and settlement offers threatening fee income face automatic rejection. The R450 Million Question As judgment approaches, the MTI precedent looms like a financial death sentence. The R450 million that vanished from MTI's estate represents more than accounting irregularities or market volatility. It demonstrates how professional fees can consume entire estates while creditors wait indefinitely for justice that never arrives. A bankruptcy specialist summarised the brutal reality: "This is not incompetence or unfortunate circumstances. It represents a refined business model where creditor suffering generates professional prosperity. The longer estates remain in liquidation, the more fees accumulate. Quick resolutions are bad for business." Justice or Professional Jackpot? Judge Le Grange holds extraordinary power. His decision will either deliver justice to Banxso clients through immediate settlement acceptance or condemn them to the liquidation lottery that has already claimed MTI creditors. The choice represents far more than legal procedure. It determines whether South Africa's courts serve creditor interests or enable professional wealth extraction. The evidence is overwhelming. Banxso stakeholders have fought regulatory pressure, challenged FSCA overreach, and offered complete creditor protection through guaranteed settlement funds. They have demonstrated unprecedented commitment to client welfare in a system designed to sacrifice creditor interests for professional profit. Mostert & Bosman and their preferred liquidators offer the MTI template: years of proceedings, millions in fees, and zero creditor recovery. The Final Reckoning Judge Le Grange's judgment will echo far beyond Banxso. It will signal whether South African courts recognise the liquidation cartel's systematic abuse of creditor rights or enable continued professional profiteering disguised as legal process. Judge Le Grange faces a choice between creditor protection and professional enrichment. The question haunting thousands of Banxso clients is simple: will Judge Le Grange deliver justice or feed the liquidation machine that transforms creditor suffering into professional prosperity? The answer will determine whether South Africa's liquidation system serves justice or perpetuates the most profitable legal scam in the country's history.
The Citizen
31-07-2025
- Business
- The Citizen
How Ekurhuleni under-charged Tembisa for electricity
The council must find a solution to the tariff mess. Ekurhuleni mayor Nkosindiphile Xhakaza is expected to present a report to council on Thursday about the suspension of certain fixed charges for electricity. But the mess might be bigger than the city's communications indicate. Xhakaza recently suspended the fixed charge of R109.78 (excluding Vat) for specifically single-phase non-indigent households (A2 tariffs) following violent protest in Tembisa, where residents were furious about the charge. This was already an 54% increase compared with the previous year. The suspension was meant to: Enable comprehensive, inclusive and orderly engagement with affected communities. Ensure that legitimate concerns raised by residents were systematically and effectively addressed. Mitigate the risk of recurrence of destructive and violent events such as those experienced in Tembisa during 2022. In a press release issued on 22 July, Xhakaza explains at great length that Ekurhuleni is compelled by the energy regulator Nersa to levy fixed charges 'aimed at ensuring adequate investment in infrastructure maintenance, long-term sustainability of electricity supply and equitable distribution of operational costs across all communities.' He further emphasises that the charges are informed by a cost-of-supply (CoS) study. ALSO READ: Traffic delays after residents shut down Thembisa over electricity tariff hike [VIDEO] What Xhakaza failed to admit, is that the only fixed charge Ekurhuleni could lawfully have implemented is much higher, at R142.51 and that these consumers are not the only ones who are lawfully required to pay considerably more than the amount implemented. To complicate matters further, on 1 July Ekurhuleni implemented the higher tariffs Nersa approved. After a storm of protest from councillors who relied on the numbers they approved with the budget, the city 'corrected its mistake' and reverted to the lower council-approved tariffs a day later. The amounts in the budget, which are currently implemented, and those Ekurhuleni asked Nersa to approve, differ substantially regarding residential customers in terms of fixed charges as well as the unit cost. ALSO READ: Ekurhuleni mayor to suspend electricity tariff hike after protests in Thembisa Nersa approved exactly what Ekurhuleni applied for. Schedule F – approved by council A2 Residential – non-indigent Nersa approved: Source: A resident of Ekurhuleni with a single-phase connection that is on this tariff, currently pays R627 (excluding Vat) if he uses 200 kWh/m according to the council-approved tariffs, while the tariffs approved by Nersa would have resulted in a bill of R708.25 for the same amount of electricity. The difference is more than 12% for single-phase customers. Those with a three-phase connection using the same amount of electricity would see an even bigger difference of 15%. That means Ekurhuleni added a considerable mark-up to the tariffs it consulted the public on and approved in council. Whether it was a mistake or a deliberate effort to mislead council and consumers about the extent of the increase, is not clear. ALSO READ: Experts warn of unintended consequences of giving in to Thembisa demands Moneyweb tried to engage the city about the matter, but was told by a spokesperson that the electricity tariffs are expected to be discussed in council on Thursday. Following Xhakaza's statement that the tariffs are based on a CoS study, the question arises how the city then arrived at two different sets of tariffs and if the council-approved tariffs that he quoted are indeed cost-based, why it would submit higher tariffs to Nersa that would result in an over-recovery. Further, did Nersa interrogate how the city arrived at the numbers? Electricity pricing expert Deon Conradie confirms that Ekurhuleni is not permitted to implement a different charge than was approved by Nersa, unless it goes back and applies for a change in the approved rates. He is of the opinion that the council as implementor can decide not to implement the tariff charge and take the loss of income on the chin, or stop the implementation temporarily until they have received approval from Nersa to change the tariff. How big that loss will be, is not clear at this stage. In the statement announcing the suspension, the city however states that the decision was taken after 'assessment of potential risks.' Several sources told Moneyweb they are trying to engage Nersa on the matter. Moneyweb sent questions to Nersa on 8 July, but has not received a response, despite several efforts to follow up on the enquiry. Nersa for the first time this year published both the tariff applications it received from municipalities as well as the approved tariffs. Conradie advises consumers in all municipalities to check these tariffs against those approved by council to make sure there are no discrepancies. This article was republished from Moneyweb. Read the original here.
