Capetonian Kellermann accused as kingpin of R200bn Belvedere Ponzi

Cobus Kellermann, Stellenbosch University graduate now in his late 30s who runs Cape-based money manager Clarus Capital, has been fingered as a mastermind behind a massive global Ponzi scheme run out of Mauritius.

Kellermann’s company also manages eight South African unit trusts under the Met Collective Investments banner. They have been entrusted with R1.35bn in savings from unit trust investors.

Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

Ponzi schemes occasionally begin as legitimate businesses, until the business fails to achieve the returns expected. The business becomes a Ponzi scheme if it then continues under fraudulent terms. Whatever the initial situation, the perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme.

Offshore Alert, a US-based company which specialises in uncovering fraud in offshore financial centres, describes Kellermann’s Belvedere Management as “a massive criminal enterprise”. Belvedere, which controls assets worth an eye-popping R200bn is jointly owned by Kellermann and his Irish business partner David Cosgrove.

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 well publicised Barry Tannenbaum scam.

The Clarus Capital website previously listed Anchor Capital founder and CEO Peter Armitage on its page listing  “Key People”.  After the draft of this article was sent for comment to Kellermann (and Armitage) on Saturday morning, the highly rated Joburg asset manager’s name was removed.

Armitage told Biznews he manages some money for Clarus and agreed when asked by Kellermann, “a delightful man”, for his name to be included for marketing purposes. No response to the request for comment was received from Kellermann or Clarus. This is consistent with his refusal to engage when my team at Moneyweb tried repeatedly two years ago when he was linked to a previous Ponzi scandal.

In October, Kellerman’s business was instructed by the Mauritian Financial Services Commission (FSC) to stop accepting deposits. A public notice issued by the FSC last week in response to the OffshoreAlerts article reminded stakeholders of an investigation conducted at Belvedere’s offices “and in accordance with its functions to protect consumers of financial services, the FSC Mauritius has initiated enforcement actions against the company. “

Kellerman’s Mauritian company is also under investigation by the UK authorities.

Belvedere Management Group owns and operates a number of companies involved in many aspects of financial services including fund administration, stock broking, life insurance and asset management around the world. The Group administers more than 100 hedge funds.

Two of Belvedere’s major operating businesses, Lancelot Global and The Four Elements, were licenced to accept investments by the Financial Services Commission of Mauritius in 2009 and 2008 respectively.

Both have close connections to South Africa – Lancelot is the investment manager of the Armstrong Global Diversified Fund into which 95% of the assets of the local MET CI Global Diversified Feeder Fund have been invested. The Four Elements is the controlling shareholder of JSE-listed investment firm BK One.

According to OffshoreAlert, evidence has been uncovered showing the Belvedere Management Group has also been involved in a US$130m Ponzi scheme in Cayman. It adds that the City of London Police are investigating a Ponzi scheme operated by the company in the UK involving over £100m.

It reports that investors have been duped by tweaked net asset values illustrating fictitious capital growth. This is common practice among fraudsters. Among the best known local examples was the Jack Milne/Tigon scheme operated in South Africa a decade back.

Funds entrusted with Belvedere, OffshoreAlert maintains, have disappeared through a network of offshore companies. Many of the funds administered have also been promoted and sold through a network of well-known financial services companies and intermediaries, including many in South Africa.