The Financial Sector Conduct Authority (FSCA) has revoked the financial services provider licence of Banxso, marking an escalation in its regulatory action after receiving consumer complaints about the business.
The Financial Sector Conduct Authority (FSCA) has revoked the financial services provider licence of Banxso, marking an escalation in its regulatory action after receiving consumer complaints about the business.
However Banxso, which offers investments to the public via online trading platforms, said in a statement that it intends to mount a legal challenge to the financial watchdog’s decision.
The final withdrawal, following a provisional suspension on 15 October 2024, was confirmed after the FSCA reviewed preliminary investigation findings and Banxso’s submissions, the financial watchdog said on Friday.
“The FSCA is of the view that Banxso contravened various financial sector laws in a material manner and that it no longer meets the fit and proper requirements to be a financial services provider,” it said.
“The investigation findings included that Banxso, inter alia, misappropriated client funds, provided false and/or misleading information to clients and to the FSCA, and did not act in the best interests of clients.”
The matter relates to a deepfake controversy which erupted last year with allegations that Banxso profited from deceptive ads featuring public figures like Elon Musk, Johann Rupert and Leanne Manas. The ads promised lucrative returns but investors made substantial losses. Banxso has repeatedly denied involvement with the deepfake adverts.
The company disputed the FSCA’s decision, saying it would be exercising its full right of recourse under the Financial Sector Regulation Act, including applying for reconsideration before the Financial Services Tribunal.
“The company is also undertaking a comprehensive legal review of the procedural and factual aspects underpinning the FSCA’s decision. We are disappointed by the FSCA’s decision, which in our view does not reflect the substantial engagements with and representations to the FSCA, together with the material improvements made to our systems and compliance frameworks,” it said.
Banxso said it remained “committed to the highest standards of client care and regulatory integrity and will engage the available legal avenues to fully ventilate and defend its position”.
The company said it would rely on its legal team, including senior counsel and regulatory experts, to challenge the FSCA’s decision through the appropriate statutory channels.
“The company’s legal response will be rooted in both procedural fairness and the factual merits of its case. The company remains fully committed to transparency and stakeholder engagement as the matter progresses,” Banxso said, adding that it was “particularly mindful” of the economic and operational consequences of the decision.
“These include potential impacts on its 186 employees, downstream service providers and thousands of clients. It is Banxso’s sincere belief that a full, fair and independent review of the relevant facts will ultimately support the company’s position,” Banxso said.
The FSCA said it had also provisionally withdrawn the licence of AfriMarkets Capital.
“The FSCA has taken this step because it is concerned that there may be a risk of harm to clients and/or the general public if AfriMarkets continues its operations as a financial services provider. The provisional withdrawal is based on preliminary investigation findings regarding the activities of AfriMarkets and its possible association with deepfake advertisements,” the authority said.
“The FSCA is amongst others also concerned about the apparent aggressive and pressurised sales techniques used by AfriMarkets agents when selling financial products to clients, promises of unrealistic returns, the failure to conduct the required risk and needs analyses prior to placing clients in specific financial products, and material losses suffered by clients.”
The consequence of the provisional withdrawal is that AfriMarkets is unable to conduct any further financial services business or receive any additional funds from its clients, the watchdog said.
“The FSCA emphasises that this is a provisional withdrawal of AfriMarkets’ license based on provisional investigation findings. Once the investigation is finalised, the FSCA will consider the investigation and any submissions by AfriMarkets. In the interim, AfriMarkets has been provided with an opportunity to provide reasons why the provisional withdrawal should be lifted or not made final.”
The FSCA said AfriMarkets and Banxso are “linked through common directorships and key persons and conducted their financial services business in a very similar manner”.
However, AfriMarkets, reacting to the provisional withdrawal of its licence, distanced itself from Banxso.
AfriMarkets said its banking partners had notified it that some of its accounts had been temporarily restricted “pursuant to what is presently believed to be a directive issued under section 34 of the Financial Intelligence Centre Act, 38 of 2001”.
“We are advised that such restrictions are only valid for a period of 10 days, pending further developments. Despite this, no formal notice has been received, articulating the basis of this intervention,” it said.
It had also been informed that its licence had been provisionally withdrawn by the FSCA, pending the finalisation of its investigation.
“Notwithstanding, however, to date, no formal, nor final findings have been made against AfriMarkets, and we are actively engaging with the relevant regulators in relation to their respective investigative processes. AfriMarkets has not been provided with any indication that these events are interlinked,” the company said.
“Whilst we are still in the process of seeking clarity on these invasive measures, we are engaging senior legal counsel to consider all available remedies, in order to protect the interests of our clients and stakeholders.”
It had “consistently sought to uphold its regulatory obligations and remains committed to cooperating with the authorities, in the spirit of transparency and good faith”.
“We are also aware of commentary in the public domain suggesting a potential association between AfriMarkets and Banxso. For the avoidance of doubt, whilst there may be certain overlapping stakeholders, AfriMarkets and Banxso are, and have always been, distinct legal and operational entities. There are no shared platforms, client accounts or regulatory operations between the two.”
Banxso chief executive Manuel de Andrade has previously told the Mail & Guardian that “Banxso has no connection or involvement in any deepfake ads that may exist on the internet”. The company maintained it monitored its marketing and adhered to regulations, framing itself as a target of unauthorised third-party actions.
The provisional withdrawal of AfriMarkets’ licence initially barred both entities from conducting financial services or accepting new funds.
“The consequence of the provisional withdrawal is that AfriMarkets is unable to conduct any further financial services business or receive any additional funds from its clients,” the FSCA said, adding that it would update the public in due course on any further decisions.