Revelations of yet another swindle, in which wealthy South Africans allegedly lost more than R30m, have shone a harsh spotlight on whether efforts to educate the public about the red flags are missing their mark.
This week, it emerged that 56-year-old Mark Kretzschmar, a director of Portcullis Securities, has vanished amid claims he defrauded friends, family and clients.
But this comes despite warnings over similar cons unearthed in recent years, including crypto scheme Mirror Trading International, run by Johann Steynberg who died in Brazil last year, and BHI Trust, run by the now-jailed Craig Warriner.
The Financial Sector Conduct Authority (FSCA), which regulates the investment sector, told Currency this week that it had received three complaints into Kretzschmar, and has launched a preliminary probe into what happened.
From the outside, it appears to be a classic Ponzi scheme, in which the fraudster repays existing investors with the capital injected by new investors.
Kretzschmar “doesn’t have a [financial services provider] licence”, Gerhard van Deventer, head of enforcement at the FSCA, tells Currency. This means he was never entitled to offer investment advice, much less collect or manage anyone’s money.
While Currency first heard from investors who had lost money to Kretzschmar a number of weeks ago, it has proven impossible to locate him.
But it would seem from reports by News24 that Kretzschmar used the tricks common to many scams: building trust with his “investors” through lavish hospitality, seafood braais, expensive whisky, and charm. Yet whenever anyone asked to be repaid, he allegedly came up with excuses, before vanishing altogether.
Kretzschmar told investors – a network largely of friends, family, and those who knew him – that he used the financial licence of Freedom Partners, a company based in Illovo in Joburg. But Freedom Partners says this was never the case.
It would seem even his family was fooled. In February, his wife filed a missing person’s report at Norwood Police Station, saying he’d left home without telling anyone where he was going. But in that instance, he was later found.
The con
Kretzschmar’s case would appear to be a cautionary tale of how easily financial predators exploit trust and aspiration – especially in social circles where no-one wants to admit they’ve been conned.
Surprisingly, being financially astute hasn’t protected individuals from Ponzi schemes.
Barry Tannenbaum, the grandson of the founder of Adcock Ingram, swindled R12.5bn from some of South Africa’s most high-profile investors, including the former head of the Bond Exchange, the one-time chair of the JSE, and a number of CEOs.
A research paper by two Malaysian scholars released last year surveyed 368 investors in Ponzi schemes in Nigeria. It found that while many were driven by a desire to “get rich quick”, “individual financial knowledge” was not strongly correlated either way.
Tamar Frankel, a professor of law at Boston University who wrote The Ponzi Scheme Puzzle, said many people struggle to spot a con artist as they are usually entrepreneurs and superb salespeople, who mimic legitimate investment opportunities.
She said victims are often seduced by the idea that they are outsmarting the rest of society.
“These are intelligent and knowledgeable investors who believe in their intellectual power. Nobody can pull the wool over their eyes,” she said. “They like feeling exclusive. They like participating in a select group, and con artists give them that feeling.”
Frankel said scammers often “have an inflated sense of self-importance, a sense of entitlement, and an inability to empathise”. When caught, they blame others, like the government – as Sibusiso Radebe did when he was arrested for running the Miracle 2000 pyramid scheme in Ekurhuleni in the late 1990s.
Van Deventer says fraudsters who operate these schemes have a number of common characteristics. He points, in particular to seven signs you’re being scammed.
1. Unrealistic returns
Typically, a con artist offers a return that is too good to be true. “If I knew how to make unrealistic returns, I wouldn’t tell anyone,” says Van Deventer.
2. They have no licence
All financial services providers must be licensed by the FSCA. Anyone who says otherwise is a red flag – and it’s possible to verify this on the FSCA’s website.
3. They create a false sense of urgency
They tend to apply pressure to “act now”, a manipulation tactic to prevent you from thinking clearly. Legitimate advisers will encourage you to take your time before investing
4. They make extensive use of social media
Real financial firms don’t sell investments through WhatsApp or TikTok. “Almost every FSCA scam warning relates to social media,” says Van Deventer.
5. They ask you to top-up your account to release funds
This is textbook advance-fee fraud; if someone asks you for more money to unlock your own money, you need to walk away.
6. They rely on impersonations and deepfakes
Increasingly, scammers are using AI to create convincing fake videos. One recent scam used deepfakes of FSCA commissioner Unathi Kamlana and a Nedbank executive to sell their product.
7. Unrealistic promises by ‘finfluencers’
Even legitimate trading platforms are high risk, but there is a growing threat from “signal providers” – unlicensed individuals selling investment tips, often in forex or crypto. You will no doubt have seen people who claim to have made millions trading forex, and offering to help you do the same (for a fee). “These signal providers are accountable to nobody,” says Van Deventer. “It’s very dangerous.”
The regulator is also cracking down on finfluencers – unlicensed influencers with plenty of followers who give financial advice online. “Advice isn’t just about the product – it’s about whether it suits the person receiving it,” he says. “That’s where risk comes in – and most of these finfluencers have no idea.”
Van Deventer says the number of scams premised on “finfluencers” makes for a global trend. “We belong to an international enforcement network, and this is a recurring theme everywhere.”
Exploiting weak enforcement
At this point, there is no sense where Kretzschmar is, nor whether the victims will get any money back. It is far from reassuring that so few scam artists have been jailed.
Tannenbaum skipped the country in 2009 and has been happily living in Australia ever since — and the National Prosecuting Authority (NPA) has yet to extradite him.
Last year, the 60-year-old Warriner, who swindled an estimated R3bn from 206 investors, was sentenced to 25 years in prison for fraud under a plea deal with the NPA. But in that case, he surrendered to the authorities and confessed to abusing the assets of his BHI Trust – prosecutors never had to prove his guilt in court.
The charge sheet said that while clients received monthly statements “reflecting their apparent returns, the contents of these statements were fabricated”.
It is an old scheme with few new features that has played out repeatedly for decades — and yet it appears to have worked again.
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