Currency trading is a vast and technical space, however, many get caught in the seductive web of quick gains. Untangling forex can be daunting but with patience, it can be rewarding.

Foreign exchange, also known as forex (FX), is a trade that has risen in popularity over the last decade on the continent. Many companies and sole proprietors have claimed to have amassed wealth from FX, going as far as offering seminars and flaunting their opulence on online platforms.

However, a number of them have also been exposed as frauds and scammers. This has called into question the validity of FX as a credible investment vehicle, but the semblance of wealth has also continued to attract unsuspecting investors.

Simply put, FX is the market where foreign currencies are traded. It is a vast and mercurial space as currencies from all over the globe participate in this market. The buying and selling of currencies in this decentralized global market is determined by whether markets move up or down and traders make decisions based on these movements.

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These market conditions influence how traders speculate and make predictions, with the ultimate goal of selling a currency at a higher price than it was purchased for in order to make a profit.

FORBES AFRICA followed the breadcrumbs of an unsettling FX story that has since uncovered a police investigation into a shocking FX scam that spans provinces and allegedly defrauded millions from unsuspecting investors. How easy is it to pose as a forex trader? What steps do investors need to take to ensure their money is the hands of reputable traders?

Forex landscape in Africa

In relation to other markets, the popularity of FX in Africa is relatively new. The first retail forex CFD (contract for difference) on the continent opened its doors in 2017 in Sandton, dubbed the richest square mile in Africa.

This is an indicator that FX had not been previously commercialized on the continent, while globally FX lounges were commonplace. This speaks to the idea that FX is still developing in Africa. It is also an indicator that Africans have shown enough interest in FX for investors to identify a gap in the market and take the risk of trying what others have not previously ventured towards.

Although it has provided investors the golden opportunity of an uncharted territory, it has also created a feeding frenzy for predators looking to exploit a decentralized market that produces an average value of $5 trillion daily trading volume globally.

FX trading occurs digitally, via the internet which is an immeasurably colossal space, with crevices like the deep web that elude the average Googler. Its boundlessness means that it does not fall under any particular jurisdiction and, therefore is not restricted by laws and regulations.

Nick Sproule, retail trader and director of Blackstone Futures. Picture: Motlabana Monnakgotla

Herein lays the first of many obstacles for an unsuspecting investor who hands money over to scammers. Technically, anybody can trade should they choose to do so and this opens the door for reputable traders and shysters alike.

Economist Kathy Nicolaou Manias cautions that “scamming in the digital space is very intense… it’s actually very easy to be scammed but you’ve got to keep your wits about you and be very careful.

“The forex environment is an incredibly volatile one, especially if you’re looking at the rand. It’s different if you’re looking for a retail trader – that’s someone who is an agent who can convert currency for you,” says Manias who is a leading expert on the continent on illicit financial flows, AML/CFT, beneficial ownership and trade-based money laundering.

There has been increasing evidence to show that a significant number of people who invest in FX have a limited understanding of what it entails and inadvertently end up being victims of unscrupulous traders, trainers, brokers, and companies.

The draw to the FX market is that it’s purported to be a space of opulence and lightning-quick extraordinary returns for relatively little work.

Nick Sproule, who is a retail trader and director of Blackstone Futures – which is a forex and CFD company, says his clients are “mom-and-pop clients who are interested in being involved in the financial markets”.

He agrees it’s possible to make large sums of money but says there are a variety of distorted associations with FX.

“You can make excessive profits in a short space of time, based on the amount of capital that you put in… There are a lot of people out there that purport themselves to be mentors, trainers, FX experts that who lure people in with this idea of big wads of cash and create the idea that it’s achievable for everybody.

Typically, there’s a training program that comes with it; they offer free signals, and the reality is that most of these mentors or trainers can’t trade themselves.

Nick Sproule

“They make money charging R20,000 ($1,415) for a course, people part with their money and before you know it, they haven’t learned anything and the mentor has disappeared.”

Manias echoes Sproule’s sentiments in saying there might be a burst of financial incentives from trading but it’s inconsistent and therefore it’s erroneous for traders to perpetuate the idea that FX offers a limitless amount or wealth daily.

“The rand is probably one of the most volatile exchange rates globally. It’s a very small, open economy …so that can promise you ridiculous things in a short space of time but over the long term, that can be very unsustainable,” Manias says.

Those interested in trading are not at the complete mercy of shysters. The South African Reserve Bank (SARB) enforces the exchange control legislation.

These “controls are most commonly imposed because of concerns about outward flows, but controls can also be imposed to restrict inward flows, for e.g. an influx of funds risks damaging an economy,” SARB reports on its site.

Despite vigilant monitoring, insalubrious practices by false traders can, at times, go unnoticed because scams often include scenarios where the victims voluntarily offer their money or personal information.

“South Africa’s reserve bank has probably got one of the most sophisticated foreign exchanges, particularly for a developing country. That forex surveillance office functions incredibly well and it’s got a very good handle on how it manages forex in the market,” says Manias.

Big banks

According to reports, the dollar is the most traded currency globally, taking up 84.9% of all transactions. The euro is second at 39.1%, while the yen is third at 19.0%.

On the continent, the only local currency ranked among the most-traded in the international FX market, is the South African rand, which was placed at the end of the top 20 in 2017 – accounting for 1% of the world’s daily currency trading, according to a survey by the Bank for International Settlements.

Also, in the last three years, the rand has strengthened by almost 6.3% against the dollar since December 2015 – making it the strongest currency against the dollar in this period, according to data published in December 2018 by independent analyst Johann Biermann.

As much as this bodes well for the economy, it is an indicator that the rand is fluid/volatile. Fluidity reflects that the rand is highly malleable and is often affected by external conditions.

“The rand is too volatile. Today, it’s up 10 cents, then tomorrow, something silly happens; we have a Bosasa scandal and the next thing you know, the rand plummets again,” Manias laughs.

Economist Kathy Nicolaou Manias. Picture: Supplied

How can this fluidity be used to the advantage of those involved in currency?

In 2017, South Africa’s Competition Commission filed an affidavit stating that more than a dozen banks were illegally profiting from the rand’s volatility.

A total of 17 banks were implicated, three of them were South African banks.

Sproule says that those who can manipulate currencies do so because as conglomerates, they dominate the environment.

“There are only a handful of big market players, these are the banks that set the prices for the rand–the big banks.

“Because the rand is controlled by a couple of big players, it is much easier for them to move the market much faster. You only have to look at the fact that there will be announcements on policies that come out, and before that, the rand has already moved quite significantly.

“I think it’s easier to move because it’s controlled by a handful of people who have good access to information that we wouldn’t necessarily have access to,” Sproule says.

Manias acknowledges that there are instances where banks might exchange information, however, as part of common business practices that many partake in.

“From a competition perspective, you can understand that if they [banks] are colluding to manipulate the exchange rate, they are driving the price up or down,” she says.

“Institutions would do things like that. Whether it’s done nefariously or with the intention of proven business practices – it’s difficult to prove.

“In the early ’90s, George Soros and his son collapsed the rand… If you have enough capital backing, you can easily do that. And South Africa is a small open economy, so it’s really vulnerable to that kind of volatility. (Cont)

“Whether big banks intentionally do that, I’m not sure. I wouldn’t blatantly state that big banks are manipulating the exchange rate… I’m not saying it’s not happening, I’m saying – I think if there’s an opportunity, anybody is going to capitalize on it,” Manias says.

Another Africa incident where banks were in hot water recently; the Central Bank of Nigeria (CBN) barred 15 Nigerian banks from accessing the small and medium enterprise (SME) foreign exchange market. This decision was made in 2017 as a result of persistent complaints that banks were preventing SMEs from accessing the foreign currencies window created for them.

Through the forex window, the CBN had aimed to offer each SME up to $20,000 per quarter.

Victims of forex scams

We’re all aware that bad news travels fast but what happens when unbelievably good news about money enters the grapevine?

FORBES AFRICA was initially informed of an incident where 50-year-old Vanderbijlpark resident Maria Cock said there was a suspicious incident where a friend offered to invest R1,500 ($106) on her behalf to Marelize Coetzee (not her real name), a forex trading company owner.

However, Cock did not receive her pay-out within the timeframe she was given.

At the time, Cock was mourning the death of her husband who had recently passed in 2018 and her family friend, in an effort to comfort her, told her about an amazing forex trading entity that was paying out large sums of money within a very short waiting period.

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“I didn’t really have any interaction with her [Coetzee]. My brother-in-law’s wife introduced me to the scheme and told me that they put the money into the scheme and then she [Coetzee] goes onto the forex market and makes the profits.

“She invested the money [R1,500] for me and then she told me at the end of the month how much I made. I told her to reinvest that R3,000 ($212),” Cock says.

“I did not invest my own money but my son invested money. Before she [Coetzee] started having problems, he applied for his money but never got it back.

What are these problems?

Currently, Coetzee is being investigated by the Hawks, South Africa’s Directorate for Priority Crime Investigation, which targets organized crime, economic crime, corruption, and other serious crime.

“Cases of fraud and theft have been opened against the alleged suspect on the matter, and we have obtained enough witness statements from Gauteng, Western Cape, and Eastern Cape,” said Hawks Communication Officer, Captain Ndivhuwo Mulamu.

“After investigations have been finalized, the docket will be handed to NPA [National Prosecuting Authority of South Africa] for a decision. A directive will be given whether to prosecute or not.”

How exactly did Coetzee come to be investigated by the Hawks?

Sanet Vance, 40, from Sasolburg, which is part of the Vaal triangle, invested into the FX company. She too was not paid and has since made it her mission to ensure she gets answers.

“We paid money into a bank account that was under Marelize’s name. In July [2018], no money was paid out… It went like that up until she told us she lost all the money [in October].

“She kept saying to everybody that ‘your investment is growing, you will get your money at the end of the month’. Then suddenly there was a problem at SARS, then there was a problem at the reserve bank,” Vance says.

Sanet Vance has since made it her mission to ensure she gets answers from the alleged scammer. Picture: Motlabana Monnakgotla

The Vaal Triangle is a triangular area formed by Vereeniging, Vanderbijlpark and Sasolburg and is 83.3 kilometers from the FORBES AFRICA offices in Sandton, Johannesburg. Numerous visits were made to the triangle because of the sheer volume of stories that were coming out about Coetzee.

At some point during the collation of stories, Coetzee, who perpetually changes her phone number, agreed to meet with us but did not honour the appointment.

“I would like to meet you and give you my side as well,” she texted.

Her clients say she has been evading them since September 2018.

Vance, who acted as an agent and was recruiting for Coetzee, says the moment she started to realize that something was wrong, she advised her clients to stop investing. Or if they wanted to reinvest, they should consider using initial pay-outs that her clients had not received.

She says Coetzee told her that payments were stalling because her paperwork was not in order and she had a myriad of excuses. Eventually, Coetzee announced to all her investors all the money was lost while trading.

“When things get heated, then she suddenly gets sick.”

“Two weeks after she [Coetzee] let the people know that all the money was gone, a client had to make her give the money back. She stood there the whole day because it was R1 million ($70,731) – all her pension,” Vance says.

Lives affected by the scam

Numerous accounts have been given by Coetzee’s former clients stating that their first interactions with her were at a chain-restaurant in the Vaal Mall where she used to set up station and claim to be working.

Economist Nicolaou says, “I know it sounds terrible, because progressively, businesses are getting smaller and more people are operating from home. But if you are a legitimate large-scale trade, why are you operating from home?”

“A legitimate company would have a proper office and would be registered with the bank.”

Nosipho Zungu, 22, former employee of the chain-restaurant, says Coetzee was watching her as she worked and eventually recruited her and asked her to be a receptionist for a higher salary.

“She [Coetzee] used to tip very well, everyone wanted to serve her and eventually I was that person. I was excited it was my tip for the day,” Zungu says.

“She asked me to sit down and told me, ‘we have a position for you, we make money’.”

“I resigned and started working at the office. I was handling new investors and anything else I could do, I did it. ”

“Eventually, things got so bad that she couldn’t pay clients anymore.”

Nosipho Zungu and her fiance who invested with the alleged scammer. Picture: Motlabana Monnakgotla

Zungu says she did not do work at the operational end of the business, so she is unable to say how money was handled from end-to-end.

She worked for Coetzee for three months, from August to September. Eventually she was dismissed for reasons unknown to her.

Zungu is currently unemployed and desperately looking for work. Her fiancé sold his car and spent the money, excepting a lucrative pay-out. He did not get the funds promised to him.

Another of Coetzee’s employees, says he and his friend were recruited by her while trading at the restaurant.

“I don’t know if Marelize traded or not,” Tshepo Molefe (not real name) says.

“We were just agents, and Marelize was meant to be the trader, we were recruiting people who were interested in investing in forex.”

“Each day, we were getting between 10 and 20 clients. Some were recruited through word-of-mouth, and others would call the company.”

“Clients would come in and sign forms. Then they would deposit money into Marelize’s bank account, and we would give clients updates,” says Molefe who worked for Coetzee from June-October.

When asked how he was giving clients updates if he personally did not trade, he says, “Marelize would give us updates which were good in terms of money clients were making. But, instead of paying money back to clients, she would give them excuses about SARS and her account being blocked.”

Molefe is currently unemployed.

Another former employee who “did admin and data capturing,” says her life has been in turmoil as a result of working for Coetzee.

Elize du Toit (not real name) says she is humiliated by being associated with Coetzee.

“I told most of my family about this trading and they invested in it and most of them lost their money. I feel so embarrassed that I have to look them in the eyes and they lost their hard earned money in something I got them into.

Elize du Toit

“I never knew if she was really trading but she told me she was trading and had other people trading for her.”

“To this day, she ignores me when I make contact. I’m so tired of how she ruined my life and I want to end that part of my life,” Du Toit says. She too is currently unemployed and desperately looking for work. Her relationship with her family is not the same.

Pensioner Danny van Buren Schele, 72, says he was recruited by one of the employees at the chain-restaurant. He parted with R2,000 ($142) of his money that he could not afford to lose.

“I gave her R2,000 ($142) and she told me that I would get R24,000 ($1,708) after a month.”

Pensioner Danny van Buren Schele who invested with the alleged scammer. Picture: Motlabana Monnakgotla

“Then she sent us a message telling us that there was a special for September. You invest R9,000 ($640) and you get R400,000 ($28,475) back. So I told her to take the R9,000 ($640) from the R24,000 ($1,708) and reinvest it. To this day nothing has happened. I did not get my money back,” van Buren Schele says.

Another employee at the restaurant says she persuaded her father, who has cancer, to invest a portion of his pension and she is heartbroken as she was hoping that she could use the pay-out for medical fees.

Yet another employee at the restaurant says she persuaded many of her friends and family members to invest and she now lives with the stress of knowing that people lost money because of her.

FORBES AFRICA visited other businesses at the Vaal Mall, and more employees at other businesses were vocal about the havoc investing into Coetzee’s business has wreaked in their lives.

The Hawks know to a greater extent the effects of Coetzee’s actions.

“There are allegations that the alleged suspect lured unsuspecting investors to believe that they were investing into a legitimate forex trading company. However, we cannot comment on the content of the evidence-gathered during the investigation process, but we are looking at over R10 million lost by investors,” Mulamu says.

Manias offers advice.

“We live in a digital age where we have access to a lot of information, as a result, we have access to a lot of liars, thieves and charlatans.

“On the due diligence side, check if you’re with a trader who is registered with the reserve bank.

“Track their record. Are they a registered entity? Check what kind of currency are they trading. If it’s a SARS reference number, validate it somewhere.

“Do Hello Peter checks, to see what’s being said. We need to be very vigilant about personal information,” says Manias.

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