The Belvedere Ponzi Scheme Unravelled

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Belvedere Management Group, the financial solutions company at the heart of what could potentially be one of the largest financial fraud cases the world has ever seen, are coming under fire from all angles today having been exposed by OffshoreAlert as “an essentially criminal enterprise”.

A label such as this, when attached, is for any financial institution extremely detrimental to say the least, but when the evidence is presented it’s hard to be able to find any other description.

The Ultimate Ponzi Scheme

The Belvedere Group have faced accusations, for which they have been unable to respond, from investigative journalist David Marchant who runs OffshoreAlert. The accusations range from providing hedge funds which are used to defraud investors across the globe, to providing false net valuations, and generally misleading both investors and financial consultancies who were presented with fund investment opportunities, which at the time had all the hallmarks of being ultimately profitable.

These accusations would appear to specifically apply to two funds in particular; a currently active $130 million fund based in the Cayman Islands and the frozen Strategic Growth Fund (SGF) which attracted so many of the world’s leading banks and consultancies. The chances are that more of the 120-plus Belvedere-associated funds will start to become unravelled as more focus is placed on them, but the true extent of the fraudulent activity remains to be seen.

In essence, the fund operations which have thus far been exposed can only really be labelled as Ponzi Schemes.

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The phrase “Ponzi Scheme” is banded around the finance industry with startling regularity, and having this term attached to an investment fund or operation will always cause irreparable damage to the reputation and credibility of the institution concerned.

This is how it works, and how it is alleged that Belvedere went about passing due diligence with the large number of high profile institutions they approached for investment in the SGF: They paid returns to investors from newly invested capital, there was no profit earned, just more investment coming in. When the investment dried up, the fund performance collapsed.

Touting

So in the case of the Strategic Growth Fund, the manager of the fund or one of his cronies would approach a bank or financial institution armed with impressive performance claims backed up by the  figures. The institution approached would then encourage their investors to place their money in to the fund which was, for the first two years, outperforming the market significantly.

It didn’t last for long though, as the fund performance significantly dropped off once the majority of the major players were on board. The deVere Group, the largest financial consultancy in the world, were one of the many respected global financial institutions that saw the remarkable performance of the SGF, and subsequently encouraged their clients to place funds into it.

In 2013, when the performance nose-dived, alarm bells rang for the group’s analysts and very quickly deVere’s management were advising clients to pull-out immediately. Although some of their clients got out in time, the fund was frozen due to the large amounts being removed, and many banks and institutions still have client money frozen within the fund.

The deVere Group, headed by CEO Nigel Green, had upwards of $50 million of clients’ money invested in the fund, and although they managed to get a large number of their clients out just in time, there were still some locked in. The group have since managed to recover a portion of the frozen remainder, but not all of it. This is something they are continuing to go to great lengths to achieve. Other financial advisories had similar amounts placed into the SGF, with a number of global banks contributing significantly more.

The process of getting this capital returned is complex, and could take years – if it is at all possible, but with the rumours that Belvedere – who hold a staggering $16 billion worth of investment in their funds – are on the verge of collapse, it is difficult to predict exactly what can be salvaged.

If they do collapse, and $16 billion goes missing, the shockwaves will be felt around the financial world for years to come. When you consider that one of the oldest financial institutions in the world, Barings Bank, was brought down by Nick Leeson losing $1.3 billion, you get the idea of the potential repercussions in this instance.

Nigel Green is not one to accept financial deceit, underhandedness or fraudulence, and deVere has been instrumental in uncovering the Belvedere Group and assisting with the David Marchant exposé. It is hoped the evidence they have submitted will be influential in bringing the two shady characters behind Belvedere to justice, if all the claims are proven.

The two men involved are Cobus Kellermann, a South African, and David Cosgrove, an Irishman responsible for collapsing mCubed, a financial services company which preyed on South Africans concerned with the future economic stability of the country. He helped a large amount of clients illegally pump money offshore until he was caught. He left South Africa and began operations from the safe haven of Mauritius in a 50-50 partnership with Kellerman, coming up with the Belvedere umbrella to conduct their business.

Police Raids

Since the OffshoreAlert investigation, police have raided the Belvedere offices in London, and Cosgrove has issued a letter to his clients proclaiming innocence in the face of the accusations, claiming that all his funds are audited annually by an external company. With so many of his funds collapsing under suspicious circumstances, you wonder how in-depth the “external auditors” go.

In any case, the authorities are closing the net, and the two Ponzi artists are in a whole world of trouble, unless they manage to make it over to Australia. The country already harbours many of South Africa’s original conmen, leaving them untouchable. If the authorities get to them first, however, those with investments will have a far greater chance of getting their capital returned. This story will continue to unfold as the weeks progress

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