The Rise and Fall of Defencex


What is Defencex?

Almost 200 000 members joined the Defencex scheme from 2012 to 2013. The scheme promised its investors high returns of 2% a day.  60 000 of these members invested in the scheme.

But, on February 28 2013, the South African Reserve Bank (Sarb) froze Defencex’s accounts. At which point, the Defencx bank account held only R352 million of the R800+ million that flowed through the account.

Defencex functioned like a Ponzi scheme, using new investors’ money to pay out existing investors. Defencex had been paying out large amounts of money to investors. In the first two months of 2014 alone it had paid out R291.3 million.

Freezing Order

On February 5 2013, Sarb appointed inspectors from PWC to investigate the business practices of Defencex, Net Income Solutions, Cycle4Dollars and the scheme’s mastermind, Chris Walker.

Inspectors Malcolm Campbell and Louis Strydom were instructed to establish whether Walker and Defencex were breaching the Banks Act.

As a result of the inspectors’ findings, Deputy Registrar of Banks Michael Blackbeard submitted an affidavit to the court requesting that Net Income Solutions’ Standard Bank account be frozen.

Blackbeard suspected that Defencex had been accepting deposits in contravention of the Banks Act. Judge James Yekiso validated his suspicions, describing Defencex as an “illegal deposit-taking scheme” in his judgment confirming the freezing order.

Members Lose Money

Members were eventually able to register claims to the money they invested and lost in the scheme for a limited period of time. However, as the Defencex account did not contain all of the money invested when it was frozen, members were not able to get their capital back in full, if at all.

The Defencex Ponzi scheme serves as a strong warning against investing in too-good-to-be-true schemes. Many of its members lost a great deal of money to the fraudulent scheme.

Find out more about Walker’s latest Ponzi scheme, Kipi Investments, otherwise known as Mydeposit247, which is currently being investigated by the Hawks.

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