Central Bank of Swaziland Grants Interim Order to Halt Alleged Pyramid Scheme, QZ Asset Management
Date: May 13, 2023
Author: Sabelo Ndzinisa
Background
The Central Bank of Swaziland (CBE) secured an interim order on Friday, May 12, 2023, suspending the operations of QZ Asset Management, an unregistered investment scheme. The bank accused QZ Asset Management and ten respondents of being involved in a pyramid scheme.
Application and Interim Order
On Thursday, May 11, the CBE filed an ex-parte application for an interim order with the High Court. The application sought to suspend the operations of QZ Asset Management and ten respondents, whose bank accounts had reportedly received large deposits from the public.
The respondents listed in the application were:
- Cebile Mkhonto
- Vusi Malubane
- Nthabiseng Magongo
- Lungile Dlamini
- Khetsiwe Shabangu
- Sibongile Mndzebele
- Sabelo Dlamini
- Dulcy Mhlanga
- Ndumiso Nyandzeni
The application mentioned several financial institutions, including First National Bank, StandardBank, Eswatini Bank, and Nedbank.
Violation of Financial Regulations
The CBE alleged that the respondents were operating an unlawful investment scheme, QZ Asset Management, without licenses from the CBE or the Financial Services Regulatory Authority (FSRA). Upon preliminary investigation, the CBE discovered that the first to the ninth respondents had been encouraging the public to invest in QZ with a promise of high returns, up to 400%. The deposits were being paid into the bank accounts of the first to the ninth respondents.
Transfer of Funds and Unknown Destinations
According to the application, the deposits were then transferred to unknown locations overseas, and the nature and purpose of these transfers remained unclear. The depositors were reportedly encouraged to make direct deposits via an application.
Regulatory Compliance
Based on the alleged activities, the first to the tenth respondents were in violation of Sections 6(1) of the Financial Institutions Act and Section 37 of the FSRA Act. They were engaging in banking business and deposit-taking without proper licenses from the CBE. Additionally, they were violating Section 35 of the FSRA Act, which mandates individuals providing financial services to have permission under the law.
CBE’s Action and Obligation
The CBE asserted its legal right to intervene and protect members of the public from possible wrongdoing by unregistered entities and individuals. In a statement, CBE Governor Phil Mnisi confirmed that the bank had the authority to issue an order halting any activity associated with QZ Asset Management that was being conducted without a license or authorization under the provisions of the Financial Institutions Act. The operators of the company were instructed to submit all documents and information regarding their business activities within 21 days. Failure to comply could result in criminal consequences, including fines and administrative penalties.
QZ Asset Management’s Violation of Swaziland Laws
The pyramid scheme, QZ Asset Management, operates mainly from the People’s Republic of China and several other countries. The activities of the company represent a violation of Sections 6(1) of the Financial Institutions Act and Section 37 of the FSRA Act, as the company was not registered as a financial institution or financial services provider in Swaziland.
The Financial Institutions Act prohibits any person from carrying on banking business in Swaziland without a license from the Central Bank. The first to the 10th respondents were engaging in banking business and deposit-taking, thereby violating this provision. Furthermore, they were also violating Section 35 of the FSRA Act, which mandates individuals providing financial services to have permission under the law.
The CBE took its responsibility seriously to prevent the misappropriation or abuse of private citizens’ money. Mnisi emphasized it was their responsibility to act and protect the public.