SA’s top 5 extraordinary fraud scheme stories

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SA’s top 5 extraordinary fraud scheme stories
Crazy stories about five of South Africa's weirdest investment scams.

By Peter Church -

July 6, 2015
Recent news that a South African man can be behind one of the largest Ponzi fraud schemes in the world, has put the focus on some of South Africa’s most extraordinary fraud scheme stories. Offshore Alert, a US-based company which specialises in uncovering fraud in offshore financial centres, describes Stellenbosch University graduate Cobus Kellermann’s Belvedere Management as “a massive criminal enterprise”. Belvedere, which controls assets worth R200bn is jointly owned by Kellermann and his Irish business partner David Cosgrove.

Fund manager Cobus Kellermann in a picture from his Facebook page Image by: via Facebook
Fund manager Cobus Kellermann in a picture from his Facebook page
Image by: via Facebook

Given his domicile and standing in the financial services community, it is feared that South Africans who trusted Kellermann with their money stand to lose billions of rand invested offshore. The size of Belvedere’s alleged Ponzi scheme dwarves anything to have hit South Africans before. It is ten times the scale of the Barry Tannenbaum scheme, a South African businessman who currently is living in Runaway Bay, Queensland. He is accused of running a R10 billion Ponzi scheme. In a Ponzi scheme the early investors are paid dividends from investments made by later investors, rather than from any actual profit earned by the company.

Although the fraud may not be as large or even in the billions, South Africa’s most extraordinary fraud scheme stories have the qualities movies can be made of. Here are our top five:

1. Kubus – millions disappear in the smell of rotting milk

kubus
Image courtesy of HYIP.com
Who can ever forget the enigmatic Adriaan Nieuwoudt of Garies in Namakwaland who took South Africa by storm in the early 1980s with his Kubus scheme? Nieuwoudt raised millions of rands through his “milk culture” project with thousands of South Africans falling for this classic pyramid scheme, feverishly buying the mixture of cheese and milk culture from Nieuwoudt and then “growing” it in glasses and drying it into a powder to re-sell back to Nieuwoudt – recruiting more and more people to do the same.

Thousands of people invested a reported R140-million in the scheme before it was declared an illegal lottery with the same characteristics of a Ponzi scheme. Despite it being declared illegal the Kubus business was exported to the United States in 1984. By late 1984 several corporations had been established around the product, among them: Activator Supply Company who sold “activator kits” that allowed the making of the milk culture for $350 and Cleopatra’s Secret (also known as House of Cleopatra) who said the dried powder was used to manufacture cosmetics.

1. The ‘Vliegtuigie’ game (Little airplane game) – see how far your money can fly (away from you).

Not long after the demise of the Kubus scheme the “Vliegtuigie” game engulfed the Western Cape of South Africa. In monetary value nobody knows how much money changed hands or who actually controlled it and benefited most from it, but it certainly had a large impact on social events for many months. It entailed inviting people to house parties to “build” an airplane. To become a airline captain and win money you had to convince people to buy parts of the airplane and become passengers. Passengers had to convince friend to do the same. Once you have convinced enough friends to join in, you received a large sum of money taken from the passenger fees. Large airplanes was drawn on sketch pads or even overhead projectors to keep tabs on progress and payouts.

Many students of the various universities in the Western Cape got involved and while money changed hands, the wine flowed. As always it was the thousands of passengers who “boarded” the planes lasts who lost a collective hundred of thousands of rands, while the captains who got in early walked away with the spoils.

1. The Sushi King – from prison to eating sushi off semi-naked woman

Kenny+Kunene

From humble beginnings in the Kutlwanong township of Odendaalsrus in the Free State, Kenny Kunene, studied at Vista University to become a teacher. While teaching he started running a Ponzi scheme with over 2000 investors, which led to his arrest, trial, conviction and six year imprisonment at the Grootvlei Prison in Bloemfontein. It is during this time that he met his future business partner, bank robber Gayton McKenzie.

After their release from prison Kunene promoted Mckenzie’s book about his life of crime, turning it into a best-seller. They invested their profits in several businesses. Today he is one of the wealthiest men in South Africa spending over R700,000 on his 40th birthday party eating sushi off semi-naked models and buying a Lamborghini valued at around R1.5-million. A real rags to riches story.

1. The Pyramid Queen Scheme – your money to buy Viagra for her bodyguard

Port Elizabeth’s former chocolate sales lady Maureen Clifford started living the good life with early afternoon gin & tonics and buying heaps of Viagra to assist her bodyguard in his duties shortly after she started her Usapho Trust in the ‘90. She convinced the wealthy farmers of the Eastern Cape, advocates and medical specialists she was running a private bank, getting them to invest around R155 million and paying return on investments of up to 15%. The scheme seemed to work for about five years before news broke that she was defaulting on repayments.

Clifford, then 61, her sister, Thelma van Rooyen, 57, her daughter, Dalene de Witt, 32, and two former ABSA bank employees, Neil Terblanche and Otto Swart, all of Port Elizabeth, were charged with fraud, alternatively theft, and with contravening the Bank Act. Swart was found not guilty but the rest were all convicted with Clifford still serving a 12 year sentence.

1. The malaria watch inventor – when bull-dust flies in the face of logic

Pseudo-scientist and ‘inventor’ Gervan Lubbe was imprisoned for 20 years in 2012 for defrauding investors of millions of rands after claiming he invented a wristwatch that would tell you if you are going to get malaria.

Lubbe, the inventor of the APS Therapy pain relieving device, convinced thousands of people to invest more than R21 million in his business. He did this by selling shares in his company and convincing investors and directors he would publish a tell-all autobiography titled Full Disclosure, produce the groundbreaking malaria-detecting watch and launch an upgraded version of his APS pain management device. The book was a joke with only 60 copies published and not one sold. One entire chapter was plagiarised. The malaria watch never materialised and Lubbe was accused of using investment capital as his “own personal piggy bank”.

The malaria monitor was supposed to be a wristwatch-like device that pricked the skin four times a day and then automatically test the blood for the malaria parasite. Websites like NaturalNews.com and treehugger.com still carry articles about this device despite the fact that it was proven to be impossible for such a small device to do this kind of blood tests. Lubbe said his malaria monitor had been tested at the University of Pretoria but this was a lie. He also claimed, falsely, to have secured large orders for the device.

Crazy stuff. Who would invest in such rubbish? Too many people of whom many were pensioners. Now who’s going to design a bull-dust detector to prevent people from investing in schemes like this?

Cover image by karen roach via Shutterstock

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