How to unravel a Ponzi scheme: Follow the money

There seems to be a deliberate pattern emerging in the approach being taken by the Frankel Investment Scheme suspects to the unfolding story of what appears to be South Africa’s largest Ponzi scheme.

It appears to be to a deny everything strategy that puts the onus on investors (or victims) to prove their claims and attributes the meltdown to the global financial crisis.

A crock of crap if ever I’ve heard it.

If there is no basis to the claims that Tannenbaum, Reese and Leigh, among others, were running a Ponzi scheme, then in light of the enormous losses suffered by investors, they should be willing to submit themselves for questioning both by the police and civil inquiries.

Bare denials and jumping on to those issues which they can deny with a clear conscience does not detract from the fact that investors are confirming that they were being promised enormous returns based upon representations which are purportedly fraudulent. A good example of this is Tannenbaum vehemently denying that anyone can prove that he spirited his assets away from South Africa. That is not the question that needs answering. Many businessmen have ways of moving money around below the radar and that is easy to deny.

If he and his fellow suspects are genuinely “victims” then it is up to them to demonstrate to creditors why this meltdown occurred. There is certainly enough documentation coming to light to present a powerful prima facie case for wrongdoing.

What is annoying is that Tannenbaum claims that he is in Australia and won’t be moving around. As a result of this scheme, many victims’s savings have been wiped out. Surely if he is innocent he realises that a disaster of this scale requires his presence in South Africa for at least a month or two.

I have run many liquidation inquires as well as trials defending parties who were charged with fraud. As such, I would love him to take me through the documentation, including the purchase orders, the book debt and other securities.

He can map out how they proposed to pay the returns to investors by submitting all financials, including bank accounts, into which the investor’s money was paid, as well as the orders to acquire and sell the pharmaceuticals. This is supposedly where they would make all the money required to pay investors rather than, say, gaining new investors whose money was paid to cover old investors.

Once we are through that part, Tannenbaum can — using the documents — demonstrate how the global economic crisis had any effect on this scheme.

In all of these schemes, the trick is to follow the money and I’m sure that this road map will prove to be a real eye opener.

Of course, if the parties alleged to be responsible for a Ponzi scheme simply feel the onus is on creditors to prove everything, then the sooner dockets are opened the sooner the matter can proceed.

With the number of lives that have been ruined by this debacle, the state needs to be seen to be proactive.