Investors may have lost R100 million in a scheme run by a prominent Joburg advisor, who warned them to prepare for a ‘coming crash’
- Thomas Stringfellow ran an investment group that may have had more than R800 million under management before his arrest on Thursday.
- Regulators are worried about recovering R100 million of that money, and whether pensioners are likely to get their money back.
- Stringfellow was warning of a coming crash in global stock markets – while soliciting investment in the local business of Australian fitness clothing brand Lorna Jane.
- For more stories, see www.businessinsider.co.za.
Five months ago prominent South African financial advisor Thomas Stringfellow warned that "there’s lots of opportunity in the world, but at the same time there’s significant risk".
"We’re quite convinced that there's going to be a stock market crash," he told potential investors in a video message, urging them to get in touch with his Stringfellow Group to find safety.
"Let’s see if your portfolio is prepared for this crash that we think is imminent," Stringfellow said at the end of the eight-minute video.
On Thursday Stringfellow handed himself over to police in Johannesburg after allegations he may have misappropriated client funds.
The Financial Sector Conduct Authority is worried that at least R100 million – of some R800 million the Stringfellow Group most recently claimed to have under management – may not be recoverable.
That is money invested into unregulated funds, at least some of which is believed to have gone into the local operations of Lorna Jane, a sportswear company from Australia. Stringfellow and his wife ran the South African shops for the brand, none of which appear to be operational anymore.
Investors, many of them pensioners, were offered returns of 14% per year, paid on a monthly basis, to put money into Lorna Jane via a loan scheme, Moneyweb reported.
One investor told Business Day that his loan to Lorna Jane was due to be repaid in November last year, but he had been unable to get his money back.
Some R130 million in two unit trusts with the Stringfellow name, the Stringfellow Stable Fund of Funds and the Stringfellow Flexible Fund of Funds, are safe with external fund managers, but it is not yet known how much money went into unregulated funds, and where that money was parked.
It is also not yet known if investors were paid "dividends" using capital from new investors, in the classic Ponzi-scheme model.
In his video message posted earlier this year, Stringfellow explains that the 2008 financial crash came about because banks gave money to "unsophisticated investors". That combined with a "flawed" financial model in which banks do not keep 100% of depositor money available to return to them on demand, which can lead to runs on banks, he said.
"Something has to give," he said of the current global financial situation.
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