… “You cannot rehabilitate something that never lawfully existed,” argues FSRA
BY SIFISO NHLABATSI
MBABANE– The Financial Services Regulatory Authority (FSRA) has argued that every decision and transaction undertaken by Status Capital Building Society is now tainted by the underlying fraud, as it seeks a final winding-up order against the financial services provider.
The matter, in which FSRA is the applicant, Status Capital Building Society is cited as the first respondent and Mbongiseni Nkambule as the second respondent, will be heard before Judge Mumcy Dlamini on Thursday.
In its Heads of Argument, FSRA maintains that Status Capital never operated the licensed business of a building society but instead functioned as a “pyramid or money multiplication scheme” that collected funds from members of the public and channelled them to related entities.
The regulator is seeking confirmation of a provisional winding-up order granted on December 24, 2025, together with ancillary relief.
Status Capital’s shareholders and investors, as well as Nhlangano Town Council, have opposed the final winding-up application, arguing that the entity could still be beneficially operated if it is not liquidated.
However, FSRA has rejected the opposition, arguing that the company cannot be rehabilitated because its operations were founded on unlawful conduct.
“Every decision and transaction by the 1st Respondent is now tainted by the underlying fraud. Fraud unravels all. You cannot rehabilitate something that never lawfully existed,” FSRA argues.
The regulator alleges that Status Capital, which was licensed in November 2019 to operate as a building society, failed to conduct the business it was authorised to undertake.
According to FSRA, a building society’s principal objective is to use funds obtained from shares and deposits from the public to provide advances secured by mortgages over immovable property.
Instead, FSRA alleges that Status Capital solicited investments from members of the public through products promising high returns, including fixed-period shares and monthly interest fixed deposits.
The regulator states that between June 2020 and September 2025, approximately E205.4 million was deposited by members of the public into Status Capital’s accounts.
FSRA alleges that investors believed their funds were being placed into safe and secure investments offering high returns with minimal risk.
However, the regulator claims that the money was transferred from Status Capital’s deposit account into other accounts controlled by the company and related entities.
FSRA alleges that millions were transferred to companies linked to Status Capital’s controlling individuals, including Swaziland Debt Factoring Firm (SDFF), Claymore Procurement Solutions, Status Capital Asset Management, Fintegrate and Basira.
According to the court papers, SDFF allegedly received E63.6 million, Status Asset Management received E13.1 million, Claymore Procurement Solutions received E6.1 million, Aluma Capital received E7.3 million, Basira received E1.2 million and Fintegrate received E820 000.
The regulator alleges that these transactions were disguised through cession and debenture agreements, which it describes as a façade used to transfer investors’ funds to related entities.
FSRA argues that the debenture arrangements were effectively unsecured loans that allowed Status Capital to advance millions of emalangeni to entities controlled by the same individuals who controlled the building society.
“The Cession and Debenture Agreements were a façade used to siphon the money invested by the public to related entities,” FSRA states.
The regulator further alleges that Status Capital was not generating income through legitimate business activities but was instead using money from new investors to pay operational expenses and returns to earlier investors.
FSRA describes this as a typical characteristic of a pyramid or Ponzi scheme, where early investors are paid using funds from subsequent investors until the scheme becomes unsustainable.
The regulator relied on previous court decisions dealing with pyramid schemes, including cases from Lesotho and South Africa, arguing that such schemes inevitably collapse because they do not generate genuine returns from underlying economic activities.
FSRA further alleges that Status Capital became factually insolvent because its liabilities exceeded its assets and it could no longer meet obligations owed to investors.
The regulator states that by mid-2024, Status Capital had stopped honouring matured investments, resulting in panic among investors demanding repayment.
According to FSRA, the company continued accepting deposits despite failing to pay investors whose investments had reached maturity.
The regulator argues that Status Capital’s conduct amounted to fraudulent and questionable practices, unsafe and unauthorised business operations and financial crime as contemplated under the Financial Services Regulatory Authority Act.
FSRA alleges that the company violated financial services laws, including the Building Societies Act, the Anti-Money Laundering and Financing of Terrorism Act and market conduct requirements under the FSRA Act.
The regulator also argues that Status Capital cannot be placed under judicial management, as requested by some opposing parties, because such an order would effectively allow unlawful activities to continue.
“This Honourable Court is being asked to legitimise otherwise unlawful activities through an order for judicial management. This is untenable,” FSRA argues.
The regulator maintains that liquidation is in the best interests of investors because it would allow the recovery of funds and ensure equitable distribution among creditors.
FSRA argues that allowing individual investors or creditors to pursue their own interests outside liquidation would create unfair preference and prejudice the broader body of creditors.
The regulator also challenges the standing of Nhlangano Town Council and the investors to oppose the liquidation, arguing that they are creditors who should participate in the liquidation process rather than challenge the regulator’s statutory powers.
FSRA maintains that it acted within its mandate under Section 73 of the FSRA Act, which empowers it to apply for the winding-up of a financial services provider where there are concerns including insolvency, fraudulent practices, unsafe business conduct or financial crime.
The court will now determine whether the provisional winding-up order should be made final.
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(Courtesy Pic)
