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REPUBLIC OF SOUTH AFRICA



IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA

Case Number: 047643/2023



In the matter between:


In the matter between:

THE STANDARD BANK OF SOUTH AFRICA Applicant

and

THE SOUTH AFRICAN RESERVE BANK First Respondent

THE MINISTER OF FINANCE N.O Second Respondent

NOMFUNDO TSHABIZANA N.O Third Respondent

(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED: NO
______________ _________________________
DATE SIGNATURE
JACQUES ANDRE FISHER N.O Fourt Respondent
(In his capacity as joint liquidator of
Lep Cash and Carry (Pty) Ltd

NEDBANK LIMITED Sixth Respondent


JUDGMENT
Motha , J

Introduction

[1] The consequences of the massacre of Black people in Sharpeville reverberated
inside the corridors of the Apartheid economy and shook the very foundations
of the regime. To stem the tide of the resultant capital flight and a run on the
rand, the apartheid regime passed the Exchange Control Regulations in
1961(Excon), which, save for a few changes, is still in place. Promulgated in
terms of s 9 of the Currency and Exchange Act, Regulation 22D of Excon forms
the subject matter of this review application before this court. The vexed
question is whether these 60 plus old Excon Regulations are fit for purpose to
deal with the machinations in the world of cryptocurrency.

[2] Having had the money in its Money Market Account and Nedbank Limited
Account declared forfeited to the state in terms of Regs 22A and/or 22C of
Excon, the Standa rd Bank Limited, the applicant, brought this review
application to set aside the order of forfeiture, in terms of Reg 22B of the
Excon.

The parties

[3] The applicant is The Standard Bank of South Africa Limited, a company with
limited liability registered and incorporated in accordance with the company
laws of the Republic of South Africa.

[4] The first respondent is the South African Reserve Bank, a central bank that is
governed by s 223 of the Constitution of the Republic of South Africa1 and
South African Reserve Bank Act2. It is established in terms of section 9 of the
Currency and Banking Act, and as an organ of state has as its primary object
the protection of the value of the currency in the interest of balanced and
sustainable economic growt h in the Republic, in terms of s 224 of the
Constitution of South Africa.

[5] The second respondent is Enoch Godongwana, the Minister of Finance of the
Republic of South Africa, who is cited in his official capacity.

[6] The third respondent is Nomfundo Tshazibana N.O. an adult male person who
is the Deputy Governor of the Prudential Cluster of SARB and is cited in his
official capacity as an employee of the SARB.

[7] The fourth respondent is Jacques Andre Fisher N.O. an adult male who is cited
in his capacity as the j oint liquidator of Leo Cash and Carry.

[8] The fifth respondent is Luisa Zanele Macalagh N.O. an adult female who is
cited in her capacity as the joint liquidator of Leo Cash and Carry.

[9] The sixth respondent is Nedbank Limited, a company with limited liability
registered and incorporated in accordance with the company laws of the
Republic of South Africa.

Facts in brief

[10] Prior to its liquidation, Leo Cash and Carry (Pty) Ltd (the LCC), established in
2018, was a wholesale trading business operating in Rustenburg, in the North
West Province. In August 2019, it approached the applicant to open a business

1 Act 108 of 1996 .
2 89 of 1990 .
current account, and an account under number 2[...] was opened. (Current
Account).

[11] In December 2019, the LCC applied to the applicant for an overdraft facility of
R40 000 000.00 rand, which was approved on 10 January 2020. As collateral
for the overdraft facility, the applicant required, amongst others, that the LCC
provide an Unrestricted Pledge of Money Market Call Account number 0[...]
with a balance of R15 000 000.00, in December 2019.

[12] Furthermore, the applicant informed the LCC that it (LCC) would be granted the
overdraft facility if it transferred its primary banking relationship to the applicant
and closed its account held with Nedbank, which inclu ded its Nedbank
overdraft facility totalling R10 000 000.00.

[13] On 9 January 2020, the LCC and the applicant concluded an agreement of
pledge and cession, as required in terms of the overdraft facility agreement and
as security for the overdraft facility. In terms of this agreement the LCC, inter
alia, surrendered and pledged to the applicant the movable property and/or
securities listed in the schedule to the pledge and cession. This schedule
referred to the Money Market Account.

[14] In compliance with the overdr aft agreement, on 24 February 2020, the
aggregate amount of R15 000 000.00 was transferred in a series of transfers
from the LCC's Current Account to the Money Market Account.

[15] Since the LCC was able to access the overdraft facility, it immediately
transfer red the sum of R10 000 000.00 from the overdraft facility to Nedbank
limited, the sixth respondent, to settle the overdraft facility which the LCC held
with Nedbank under account number 1[...] (the Nedbank overdraft facility).

[16] On 28 February 2020, the applicant received an e -mail from SARB’s Financial
Surveillance Department (FinSurv) informing it that a hold should be placed on
both the current and money market LCC accounts held with the applicant, due
to suspected exchange control contraventions on th e part of the LCC. The hold
was issued in terms of Regulations 22A and/ or 22C.

[17] Unbeknown to the applicant, FinSurv had commenced an investigation into
cryptocurrency transactions by a range of entities including the LCC, during
July 2019. Cryptocurrencies , and in particular Bitcoins, had been acquired by
certain individuals and entities including the LCC on a cryptocurrency exchange
which were transferred to foreign cryptocurrency exchanges.

[18] In compliance with the instructions from FinSurv, the applicant p laced a hold on
both the current and money market accounts. When the block order was lifted
on 18 March 2020, FinSurv instructed the applicant to keep surveillance on the
accounts. Having learned of a fraud perpetrated against it by several of its
clients related to LCC, the applicant instituted a liquidation application against
the LCC, in September 2021; and it was granted on 13 December 2021.

[19] On 15 December 2022, the applicant and the LCC’s liquidators were invited by
FinSurv to make written representati on as to why both the money market funds
and the Nedbank funds should not be forfeited to the state in the manner
provided for in Regulation 22B.

[20] Acting in terms of Reg 22B of the Regulations and despite the applicant’s
representations, on 22 February 2023 , the third respon dent took the decision to
declare forfeited to the state the following amounts:

“…the following money, namely: the amount of R16 404 700. 27
standing to the credit of the Respondent in account number 4[...] held
with The Standard B ank of South Africa Limited, together with any
interest thereon or any other accrual thereto; and
the amount of R10 000 000 standing to the credit of the Respondent in
account number 1[...] held with Nedbank Limited, together with any
interest thereon or any other accrual thereto.”

[21] On 24 February 2023, the forfeiture order was published in the Government
Gazette.

Issues

[22] The bone of contention is whether the applicant is entitled to an order setting
aside the forfeiture of the amount of R16 404,700. 27 and R10 000 000.00
together with interest thereon. The applicant submitted that it had acquired the
right to the funds in the Money Market Call Account because of the pledge and
cession, following an overdraft agreement that was granted in the ordinary
course of business, and without knowledge of any Exchange Control
contraventions. Therefore, s 9(2)(b)(i) of the Act rendered the forfeiture of R15
000 000.00, held in the Money Market Call Account, incompetent. Additionally,
the LCC owed the appl icant R 41 443 642. 97, and as its secured creditor, it
would recover a significant portion of its exposure from the insolvent estate.3

[23] At this juncture, it is prudent to pause and mention s 9(2)(b)(i) of the Act, which
provides:

“In the case of any perso n other than the offender or suspected
offender, no such money or goods shall be blocked, attached,
interdicted, forfeited and disposed of if such money or goods were
acquired by such person bona fide for reasonable consideration as a
result of a transacti on in the ordinary course of business and not in
contravention of the regulations.”

[24] The applicant maintained that on FinSurv’s version, there was no factual basis
to conclud e that the Money Market Funds or the Nedbank funds were involved
in an Exchange Con trol contravention. Consequently, these amounts could not
be forfeited to the state under Regulation 22B.


3 Heads of argument of the applicant para 24.6 and 24.7 .
[25] On the contrary, the first and second respondents argued that the mere fact
that the applicant may be regarded as being in possession or quasi -possess ion
of the rights to the Standard Bank funds, in terms of the pledge and cession or
for another reason, did not per se constitute a defence to the blocking order or
to a potential forfeiture. As a result, the incorporeal rights to the money in the
Standard Bank account remained vested in the LCC, subject to the limited
conditional rights afforded by the cession.4

[26] The respondents contended that the applicant did not have the locus standi in
judicio to set aside the decision relating to the Nedbank account. They
submitted that, first, the R10 million belonged to the LCC. Second, they argued
that its locus standi was a mere spes . The hope that more funds would be
recovered by the liquidators of the insolvent company did not vest the creditors
with locus standi to institute proceedings for the recovery of such funds.5
Finally, the payment was made by the LCC from the Standard Ba nk account
which was in credit at the time of the transfer of R10 million, and the said
money stood to the credit of the LCC when it was blocked.

The law

[27] To avoid prolixity, I am not going to quote Regulations 22A, B and C.
Regulation 22B of Exchange Cont rol Regulations deals with the procedures
necessary to obtain forfeiture of both tainted and untainted money and goods.
Dealing with both tainted and untainted money and goods, the court in South
African Reserve Bank v Khumalo6 and Another held:

“For pr esent purposes it suffices to record the following in regard to the
regulations:
• Regulation r 22A deals with the tainted goods and money, with r
22A(1)(a) providing for the attachment of tainted money and
goods and r 22A(1)(b) and (c) providing for the pro hibition of

4 Heads of argument of the respondents para 75 and 81 .
5 Supra para 30.2 .
6 (235/09) [2010] ZASCA 53; 2010 (5) SA 449 (SCA) ; [2011] 1 All SA 26 (SCA) (31 March 2010) .
withdrawals out of accounts into which tainted money is
reasonably suspected of having been deposited and the
prohibition of the use of tainted goods (this may loosely be
described as the ‘freezing’ of such money and goods).
Regulation 22A(3) p rovides that if attached tainted money and
goods are not forfeited under r 22B within ‘the period referred to
in paragraph (g) of section 9(2) of the Act’, they are to be
returned.
• Regulation 22C, on the other hand, deals with untainted money
and goods, wi th r 22C(1) providing for the attachment of
untainted money and goods and r 22C(2) providing for the issue
of an order freezing untainted money and goods. Importantly,
while r 22C(3)(b) provides for the provisions of 22A(3) to apply
mutatis mutandis to a f reezing order under r 22C(2), no specific
provision is made for a similar time period to apply to
attachments under r 22C(1).”7

[28] The constitutional court in SA Reserve Bank v Shuttleworth8 held:

“Here we are dealing with exchange control legislation. Its avowed
purpose was to curb or regulate the export of capital from the country. ..
The measures were introduced and kept to shore up the country’s
balance of payments position. The plain dominant purpose of the
measure was to regulate and discourage the export of capital and to
protect the domestic economy.
This dominant purpose may also be gleaned from the uncontested
evidence of the then Director -General of Treasury, Mr Kganyago. He
explained that the exchange control system is designed to regulate
capital outflows from the country. The fickle nature of the international
financial environment required the exchange control system to allow for
swift responses to economic changes. Exchange control provided a
framework for the repatriation of foreign currency acquired by South

7 Supra para 8.
8 2015 (5) SA 146 (CC).
African residents into the South African banking system. The controls
protected the South African economy against the ebb and flow of
capital. One of these controls, which we are here dealing with
specifically, serv ed to prohibit the export of capital from the Republic
(unless certain conditions were complied with).”9

[29] Still examining the regulations, the court in South African Reserve Bank v
Leathern N.O and Others10 held:

“Applying the injunction in Cool Ideas to interpret statutory provisions
purposively, I read the purpose of the regulations, among other things,
to be three -fold: (a) to prevent loss of foreign currency resources
through the transfer abroad of financial capital assets held in South
Africa; (b) to ensure effective control of the movement of financial and
real assets into and out of South Africa; and (c) to avoid interference
with the efficient operation of the commercial, industrial and financial
system of the country. In sum, the purpose of a bloc king or attachment
order in terms of the regulations is to secure assets which may be
liable to forfeiture in terms of the regulations. This adds to the general
context of the regulations in that a blocking order is provisional only
and the final position can only be determined if the Reserve Bank
seeks a forfeiture order. Context includes, amongst others, the mischief
which the regulations are aimed at, that is, the prevention of illicit flow
and influx of foreign capital from the country risk of damage to the
economy of the country as a result.”11

Discussion

The money in the Nedbank Limited Account


9 Sura para 5 and 54.
10 (854/2020) [2021] ZASCA 102; 2021 (5) SA 543 (SCA); [2021] 4 All SA 368 (SCA) .
11 Supra para 36.
[30] The court deemed it prudent to consider the issue of locus standi as its first port
of call. Counsel was coy in her engagement on the court’s queries of Standard
Bank’s locus standi to challenge the forfeiture of the R10 million in Nedbank
Limited account. She argued that her heads of argument were exhaustive of
the iss ue. Following a brief interaction with the court, counsel for the applicant
submitted that, if the court was not with her on the standing, it could distinguish
between the two amounts, namely: R10 000 000.00 in the Nedbank Account
and R16 000 000.00 in the Money Market Account. Her submission was that
the applicant sought the forfeiture notice to be set aside. Using the court’s
parlance, she conceded that Standard Bank was limping on the Nedbank
Money, only if the court found that there were, indeed, Exchan ge Control
Regulations contraventions. However, if the court found that there were no
violations of the Exchange Control Regulations, she submitted that the court
could not give an imprimatur to unlawfulness in the form of forfeiture of the R10
000 000.00.

[31] Counsel for the respondent submitted that Standard Bank contended that, as a
secured creditor in the insolvent estate of the LCC, the funds in the Nedbank
would constitute a source of money to which it had an entitlement. Referring the
court to Francis Ge orge Hill Family Trust v South African Reserve Bank and
Others12, he submitted that Standard Bank had no locus standi . In Franci s’
case, the Reserve Bank attached assets of a company in which Francis George
family trust was a shareholder and contended that it was an aggrieved person
within the meaning of Regulation 22D. The court held that the appellant was not
an aggrieved person and as such had no locus standi . He also relied on
Sutherland v Master of the High Court (KwaZulu -Natal, Pietermaritzburg)13,
which endorsed Francis ’ decision.

[32] To me, it seems that the applicant cannot gainsay the compelling submission
that the money was deposited by the LCC into its Nedbank Limited Account to
pay off its R10 million overdraft with Nedbank Limited. It stands to rea son that
Standard Bank was not a party to that arrangement. Nedbank Limited did not

12 1992(3)SA 91(A) .
13 2015 JDR 0970(KZD).
institute legal proceedings to challenge the forfeiture of the R10 million. What is
more, the LCC had R15 000 000.00 of its own in the Current Account which it
transferred to the Money Market Account, after the conclusion of the overdraft
agreement with Standard Bank.

[33] Since the LCC’s Account was in credit, it is logical that the LCC transferred its
own money to Nedbank Limited. There is certainly no lis between Nedbank and
SARB. When tackling Reg 22A, the applicant cited South African Reserve Bank
v Leathern NO and Others and stated: “When money is deposited into a bank
account it mixes with other money and, by virtue of commixtio becomes the
property of the bank.” The app licant is hoisted by its own petard, if by virtue of
commixtio the money deposited into the Money Market Account became the
property of Standard Bank, surely by virtue of commixtio the R10 million
deposited into Nedbank Limited became its property. I am pe rsuaded that
Standard Bank does not have locus standi to challenge the R10 million in
Nedbank Limited. Accordingly, the applicant’s review stands to be dismissed,
as far as it relates to the R10 million deposited into Nedbank Limited.

Applicant’s submissio ns on the money in the Money Market Account.

[34] Counsel for the applicant submitted that the respondents’ case pivoted around
the contraventions of Regulations 3(1)(c) and 10(1)(c) of Excon. Firing her
opening salvo, she referred to the matter of OilwelI (Pty )Ltd v Protect
International Ltd and Others14, which dealt with Reg 10(1)(c) of Excon.
Furthermore, she cited the matter of Democratic Alliance v African National
Congress and Another15, where the court said:

“The restrictive interpretation of penal provi sions is a long -standing
principle of our common law. Beneath it lies considerations springing
from the rule of law. The subject must know clearly and certainly when
he or she is subject to penalty by the state. If there is any uncertainty

14 [2021] ZASCA 102 .
15 Applicant’s heads of argument subparagraph 59.7.
about the ambi t of a penalty provision, it must be resolved in favour of
liberty.”

[35] Pointing out that cryptocurrency is neither currency nor a legal tender in South
Africa, she submitted that the Exchange Control Regulations regime did not
apply to cryptocurrency as a n ovel asset class. In essence, her submission was
that there is a regulatory lacuna . In developing her argument, she quoted with
approval the academic paper on cryptocurrency, which paper was uploaded
and relied upon by the respondents. In its conclusion, t he author, of the said
paper, wrote: “…the full legal ramification for a lack of regulation still remain
unknown, and the cryptocurrencies are operating in a legal vacuum,”16 and this
met with her approval.

[36] Having made those submissions, she scrutinized the regulations relied upon by
the respondents, to repeat, viz: Regs 3(1)(c) and 10(1)(c) of Excon, which in
that sequence read:

“3. Restriction on the export of currency, gold, securities, etc., and the
impo rt of South African banknotes. - (1) Subject to any exemption which
may be granted by the Treasury or a person authorized by the
Treasury, no person shall, without permission granted by the Treasury
or a person authorized by the Treasury and in accordance w ith such
conditions as the Treasury or such authorized person may impose:
(a)...
(b)...
(c) make any payment to, or in favor, or on behalf of a person resident
outside the Republic, or place any sum to the credit of such person;
or...”
AND
“10. Restriction on export of capital. -(1) No person shall, except with
permission granted by the Treasury and in accordance with such
conditions as the Treasury may impose:

16 Page 17 of the paper.
(a)...
(b)...
(c) enter into any transaction whereby capital or any right to capital is
directly o r indirectly exported from the Republic.”

[37] Dissecting Reg 10(1)(c), she zeroed in on the meaning of capital as contained
in the Regulation. She reminded the court of the matter of Oilwell , which held
that intellectual property rights did not fall within the meaning of capital in
Regulation 10(1)(c). In response to that judgment, Treasury introduced Excon
Regulation 10(4), which defines the word capital to include Intellectual Property
rights. The takeaway from Oilwell is that the regulations must be given a
restrictive interpretation, she argued. Therefore, if the scope of capital was to
be extended it had to be done by way of legislative amendment, as was the
case with Intellectual Property Rights, she argued. This, she continued, would
be in keeping with th e rule of law requirement of certainty. To further advance
her point, she referred to the case of Abahlali Basemjondolo Movement SA and
Another v Premier of the Province of Kwazulu -Natal and Others17:

“There can be no doubt that the over -expansive interpr etation of
section 16 is not only strained but also offends the rule of law
requirement that the law must be clear and ascertainable. In any event,
separation of power considerations requires that courts should not
embark on an interpretative exercise whic h would in effect re -write the
text under consideration. Such an exercise amounts to usurping the
legislative function through interpretation.”18

[38] When the court enquired whether the ordinary and dictionary meaning of capital
fits within the restrictive ap proach of Oilwell , she submitted that cryptocurrency
was not capital. She argued that a cogent framework was warranted in order to
apply the Regulations of Excon to cryptocurrency as an assets class and to
determine when such assets were said to exist with in the Republic of South
Africa. Furthermore, she asserted that the fundamental difference between

17 (CCT12/09) [2009] ZACC 31; 2010 (2) BCLR 99 (CC) (14 October 2009) 2011 (4) SA 394 (SCA).
18 Supra para 87
cryptocurrency with money was that when one purchased cryptocurrency, a
Blockchain recorded one’s purchase, and would be stored on thousands of
computers thr oughout the world. Moreover, one would have a bitcoin wallet
which could be hot or cold, hot if the software was linked to the internet, and
cold if not linked to the internet, for example: USB sticks. These scenarios
illustrated the desperate need for a n ew regime, she maintained.

[39] Turning her attention to Regulation 3(1)(c), she argued that since
cryptocurrency was not a sum of money that caused a problem for the
respondents because Regulation 3(1)(c) dealt with the restrictions of currency,
gold, security and the like, including the import of South African banknotes. She
also questioned whether there was any evidence for a cause for the
transactions and argued that the transfer of cryptocurrency from one to another
was not a payment, as cryptocurrency was not recognized as a legal tender in
South Africa. A restrictive approach had to be followed when examining Reg
3(1)(c) and cryptocurrency was not a sum of money, she reiterated.

[40] Following the energetic endeavor to impress on the court that the Exchange
Control Regulations do not find application in cryptocurrency due to a
regulatory lacuna , she submitted that the forfeiture notice, dated 23 February
2023, does not apply whether in the class under monies forfeited in terms of
Reg 22A(1)(a), (b) or (c) or 2 2C. Since Reg 22A (1) (c) deals with goods, it
certainly does not find application in this case.

[41] Following a belts and braces approach, she submitted that SARB relied on
22C, the untainted money. As proof for that conclusion, she referred to
paragraph 79 of the answering affidavit, where the SARB wrote:

“With regard to the contention that the funds blocked were , inter alia ,
not involved in contravention of the regulations… It was indicated that
the origin of the funds is not relevant for purposes of a deci sion to block
and /or forfeit under the regulations and that even money which is not
involved or suspected of having been involved in the contravention of
the relevant regulations may be ‘blocked’, if it is required to enable the
Treasury to recoup the dif ferences between an amount attached or
‘blocked’ under regulation 22A (if any) and the amount actually
involved or suspected to have been involved in the contravention or
suspected contravention of the latter regulations.”

[42] To be sequential, she began to un pack Regulation 22A and submitted that the
highwater mark of the respondents’ case is found in subparagraph 123.1 of the
answering affidavit, which reads:

“I reiterate that the scheme and the pattern of Leo Cash and Carry’s
conduct is borne out by the evid ence and is clearly described in the
PWC report. There is no gainsaying that the funds in Leo Cash and
Carry’s current account (which ended up in the Standard Bank Account
and the Nedbank Account) in all probability emanated from cash and
other deposits re ceived from third parties who participated in the
scheme and would not have been paid into the said accounts, but for
the contraventions.”

[43] She argued that Reg 22A does not find application because we simply did not
have evidence or know where funds came fr om or their involvement in the
contraventions. As mentioned supra , she submitted that the money transferred
from the Current Account to the Money Market Account became, by virtue of
commixtion , the property of Standard Bank. It was not enough to say that t he
numerous large cash deposits, at regular intervals and in various locations
were unusual, suspicious, and an indication of probably irregular activities,
which did not accord with the expected activity of wholesale business based in
Rustenburg, the argu ment went.19

[44] Even if that were true, she maintained that not all suspicious activities
amounted to proof of the Exchange Control Regulations violation. She
reminded the court of the differences in blocking and forfeiture. To this end, she
mentioned Leath ern where the court said:

19 Respondents’ heads of argument para 51

“The reasonable suspicion of the Reserve Bank may never amount to
anything more and the blocking order may lapse…
On the other hand, if the Reserve Bank’s investigation leads to a
conclusion that indeed the accounts were used in c ontravention of the
regulations, a forfeiture order could ensue, in which case, Mr Bhorat or
the depositors would have no claim to the funds, subject to a right to
challenge the forfeiture order.”

[45] Therefore, Reg 22A was not applicable, she argued and cont inued to tackle
Reg 22C, which, as already hinted, deals with untainted money. She cited
South Africa Reserve Bank v Torwood Properties (Pty)Ltd ,20 which said t he
following:

“This sub regulation presupposes that the shortfall is actual and not
merely suspected. If a shortfall is suspected, albeit on reasonable
grounds, the remedy is to be found in subreg (2). It permits of a type of
interim interdict.”21

[46] Having suggested that the shortfall was not actual, she argued that SARB
decided to rely on the Reg 22C attack based on the legal opinion of Adv
Kromhout. In brief, Adv Kromhout concluded that:

“21.1 the incorporeal rights to Standard Bank funds in the money
market account (an d the interest accruing thereon) remained vested in
Leo Cash and Carry, subject to the limited conditional rights afforded
by the cession;
this cession per se did not result in Standard Bank acquiring Leo Cash
and Carry’s rights to the Standard Bank funds - at best for Standard
Bank, it had in terms of the cession acquired a conditional right to, in
the future, take over the Standard Bank funds upon the happening of
an event in the form of a breach or default which had not been

201997 (2) 169(S CA).
21 Para 3 .
remedied by Leo Cash and Carry - but this appears not to have
happened prior to the date of the blocking order;
consequently, Leo Cash and Carry’s rights to the Standard Bank funds
remained vested in Leo Cash and Carry at the time of the blocking
order, and still are so vested;
not hav ing acquired Leo Cash and Carry’s rights to the Standard Bank
funds reliance by Standard Bank on the proviso section 9 (2) (b) of the
Act does not assist Standard Bank.”

[47] On the strength of this legal opinion, SARB accepted that the money in the
Standard Ba nk Account was standing to the credit of the LCC, she argued and
said this was an incorrect legal exposition.

The respondents’ counsel submissions

[48] Frontally confronting the submissions that there were no Excon contraventions,
he submitted that the facts of the matter are uncontested as set out in the
forfeiture notice. First, he argued that the uncontroverted statements were that
the LCC was advised that it committed and/or was party to and/or involved
and/or acted in concert with others with a common purpose to commit acts,
which on reasonable grounds, constituted contraventions of the Exchange
Control Regulations; and the LCC did not challenge all t hat.

[49] Second, the investigation conducted by SARB was on the strength of the PWC
report, which was not contested , he continued. He stated that the focus of this
matter is on the violations of Regs 3(1)(c) and 10(1)(c), e ven though the
forfeiture notice men tioned Regs 19 and 22. Addressing the issues of
interpretation and reasonable suspicion, he too relied on the matter of South
African Reserve Bank v Leathern N.O and Others .22 First, he dealt with the
question of interpretation and referred to paragraphs 3 4 and 35 of the said
judgment, in which the court said:


22 (854/2020) [2021] ZASCA 102; 2021 (5) SA 543 (SCA); [2021] 4 All SA 368 (SCA) (20 July 2021) .
“Other than considering the absence of an express exclusionary
provision, the high court did not engage in any interpretive exercise of
the regulations. Although the text is often the starting point o f any
statutory construction, the meaning it bears must pay due regard to
context. This is so even when the ordinary meaning of the provision to
be construed is clear and unambiguous. The high court erred in its
approach and reasoning.
A general principle of statutory interpretation is that the words in a
statute must be given their ordinary grammatical meaning, unless to do
so would result in an absurdity. In Cool Ideas 1186 CC v Hubbard and
Another23 para 28 the Constitutional Court put three interrelate d riders
to this general principle, namely that: (a) statutory provisions should
always be interpreted purposively; (b) the relevant statutory provision
must be properly contextualised; and (c) all statutes must be construed
consistently with the Constitut ion.”

[50] Turning to what constituted a reasonable suspicion, he cited paragraphs 15 and
16 of the very same judgment, which read:

“The high court applied the wrong test by requiring the Reserve Bank
to provide some ‘proof’ that the regulations had, in fact, been
contravened. The high court also failed properly to assess the
explanation and evidence provided by the Reserve Bank. This Court
has endorsed Lord Devlin’s formulation of the meaning of ‘suspicion’:
‘Suspicion in its ordinary meaning is a state of c onjecture or surmise
where proof is lacking; “I suspect but I cannot prove”. Suspicion arises
at or near the starting point of an investigation of which the obtaining of
prima facie proof is the end.’
Thus, all that was required of the Reserve Bank was a suspicion based
on reasonable grounds, which had to be objectively assessed. When
one considers the Reserve Bank’s detailed explanation, supported by
an excerpt from Mr Bhorat’s bank statement, the suspicion is

23 [2014] ZACC 16; 2014 (4) SA 474 (CC) .
overwhelming. For example, in just one day, 1 4 June 2017, there were
alarming movements of large sums of money in and out of the first
account: a total amount of R7 525 442 was debited in payment of
foreign entities. In all the circumstances, the Reserve Bank’s suspicion
was well -founded and reasonab le. The high court was thus not entitled
to set aside the blocking order, as the provisions of regulation 22D,
read with those of s 9(2)(d)(i)(bb) of the Act, discussed earlier, were not
satisfied.”

[51] As was the case in Leathern , in which the court placed reliance on the expert
evidence, before this court there was the PWC report which stood uncontested.
Therefore, he drew parallels and argued that there was a reasonable susp icion.

[52] With that done, he shifted his focus to Regulation 3(1)(c). He pointed out that
the contravention is not informed by the causa of the payment nor by the
identity of the recipient. Essentially, the heart of his debate was that
cryptocurrency was covered by this regulation. He directed the court’s attention
to the definitions in E xcon and read that money was defined as including
“foreign currency or any bill of exchange or other negotiable instrument.” The
rhetorical question would be what was meant by foreign currency. It is defined
as: “foreign currency means any currency which i s not legal tender in the
Republic and includes any bill of exchange letter of credit money order postal
order this other note traveller’s cheque or any other instrument for the payment
of currency payable in current unit which is not legal tender in the R epublic”

[53] Notwithstanding that all the parties agree that cryptocurrency is not a legal
tender in the Republic, he submitted that cryptocurrency was an instrument that
permitted payment in currency which is not legal tender in the Republic. As
elucidated in the forfeiture notice, the common cause fact was that
cryptocurrency was exported from South Africa to a cryptocurrency -operating
foreign jurisdiction. He narrated that the moment the rands were paid into a
South African cryptocurrency wallet, the rands l ost their character and became
cryptocurrencies, and the rand value was forever lost from the South African
balance sheet. Whilst in the foreign jurisdiction that cryptocurrency enabled the
holder of that cryptocurrency to withdraw in a foreign currency a sum equivalent
in value to that cryptocurrency, he continued. Cryptocurrency was, therefore, a
form of payment, he concluded.

[54] Referring to the academic paper, which he had uploaded and relied upon by
the applicant, he dismissed the submission of a regulato ry lacuna and argued
that the vacuum was concerned with the South African Reserve Bank Act’s
failure to recognize cryptocurrency as a form of tender, as recorded in s17(1).
Consequently, cryptocurrency is within the remit of currency in Reg 3(1)(c), he
argued.

[55] When dealing with Reg 10(1)(c), he too placed reliance on Oilwell’s elucidation
of the word capital. He cited paragraph 12 of Oilwell , in which the court held:

“It is also useful to refer to the Afrikaans text. Since the Regulations
were promulgated in English and Afrikaans at a time when these
languages were on a par, the two texts have equal authority.8
Regulation 10(1)(c) uses the term ‘kapitaal’ and ‘uitvoer’ for ‘capital’
and ‘export’. According to the authoritative Afrikaans dictionary,
Woordeb oek van die Afrikaanse Taal, the term ‘kapitaaluitvoer’ means
‘verplasing van geldkapitaal na die buiteland’ and ‘beskikbaarstelling
op die lang termyn van geldmiddele aan die buiteland’ which accords
with the financial meaning of ‘capital’ referred to abo ve.”

[56] He submitted that capital is the making of monetary resources in a foreign
jurisdiction and Reg 10(1)(c) of the Exchange Control Regulations had been
contravened. Rhetorically, he asked: Does the pledge and cession permit the
Standard Bank to claim, as it were, ownership of the money in the Money
Market Account? He not only disagreed with that proposition but also
challenged the applicant’s understanding of the matter of Development Bank
Southern Africa Ltd v Van Rensburg N .O. and Others .24 He argued that the

24 [2002] (5) SA 425 (SCA) .
last word on this topic was found in the matter of Grobler v Oosthuizen25, which
summed up the law as it stands, in paragraph 20, as follows:

“The accessory nature of pledge has the effect that on the discharge of
the principal debt the right of pledgee is automatically extinguished... In
the case of a pledge of incorporeals where only the power to realise
the right is transferred, this power re verts to the pledgor automatically
rendering it unnecessary for the pledgee to re -cede it to him.”

[57] In terms of cession and pledge what is transferred to Standard Bank is the
power to realise the right, but this right is not unbridled, he argued. This right is
informed by the expressed agreement of the parties. Scrutinizing the terms and
conditions of the loan agreement between the LCC and Standard Bank, he
cited clause 8.4. which reads:

“8.4 The Collateral may be realized in part or in full:
8.4.1 If you give written notice to us to terminate the Agreement and
request that we sell (realize) any Collateral held by us for your
obligations in terms of this Agreement. We may realise the Collateral
and credit your loan Account and/or Current Account with the p roceeds
from the realization of the Collateral and/or
8.4.2 If you are in default in terms of this Agreement and we withdraw
your rights in terms of this Agreement in accordance with the Default
clause of this Part B and/or
8.4.3 where a court has issued a n attachment order in our favour.”

[58] From the above, the argument went, it was clear that Stand Bank did not have
the entitlement to the money in the Money Market Account.

Analysis


25 2009(5) SA 500 (SCA) .
[59] Following the conclusion that Standard Bank does not have locus standi to
challenge the forfeiture of the R10 million in the Nedbank Limited Account, the
only live issue confronting this court is the money in the Money Market Account.
Indeed, it is undeniable that the LCC was involved in a scheme, and/or used as
a conduit to direct ly or indirectly export funds, foreign currency, and capital from
the Republic. The PWC Report, which remains uncontested, indicated, as
captured in the forfeiture notice, that the LCC opened and activated a business
account with VALR (Pty) Limited (VALR). The terms of service of VALR stated
that clients are only allowed to make payments from their fiat account to their
cryptocurrency account.

[60] From September 2019 until March 2020, there were frequent transactions
involving inflows and outflows in the Rand wallet and the bitcoins wallet of the
VAR account of the LLC. Without tabulating chapter and verse of the PwC
report, it is enough to state that the LLC sent 4,405.9783 BTC with the
equivalent ZAR value of R 556 020, 325,68 to Huobi Global during the 2019
calendar year, which represented approximately 75.72% of the total quantity of
BTC sent by the LCC to Huobi Global.26

[61] Thus, it is incontrovertible and uncontroverted that the LCC dabbled in
cryptocurrency. The vexed question confronting this court is whet her all the
LCC’s machinations amounted to the contraventions of Regs 3(1)(c) and
10(1)(c) of the Exchange Control Regulations. For a better understanding, a
brief outline of cryptocurrency is, perhaps, called for.

[62] The PWC report records that Cryptocurrenc y is a digital currency that was
introduced into the global market in 2009. There are various types of
cryptocurrencies, inter alia, BTC, ETH, and USDT. The first and most famous of
these is the BTC (Bitcoin). Bitcoins are not backed by any government or o ther
legal tender entity and are not redeemable for gold or other commodities. The
bitcoins are regulated by rules contained “in the bitcoin Protocol. The Protocol
provides for the total number of bitcoins that can ever exist. Users may acquire

26 Notice dated 2022 -12-15.
a bitcoin w allet. A bitcoin wallet is a software programme that includes private
keys for each bitcoin address saved in the wallet of the user who owns the
balance... There is no master server responsible for all operations. There is no
central control authority in t he network and every bitcoin transaction is recorded
on the public blockchain ledger, which increases transparency.”27

[63] A Blockchain is a decentralised ledger of all transactions across a peer -to-peer
network and using this technology participants can conf irm transactions without
a need for a central clearing authority. In short, a Blockchain is the technology
that enables the existence of cryptocurrency and due to its inherent nature (the
algorithm, cryptography, and distributed nature), it is regarded as not being
open to manipulation.

[64] Cryptocurrency is not considered legal tender in many countries including
South Africa. However, in South Africa, there are various registered operating
cryptocurrency exchanges such as VALR, Luno and AltCoin Trader. Did the
LCC contravene Reg 3(1)(c)? The answer lies in one’s interpretation of the
word currency. Certainly, gold, securities, etc. and the import of South African
banknotes do not include cryptocurrency. Cryptocurrency is not money. The
construction that cryptoc urrency is money, by looking at the definition of money
which includes foreign currency, is strained and impractical. If cryptocurrency
were money, then the crypto wallets would be attached in terms of Reg 22B.

[65] Cryptocurrency is an asset that is bought an d sold. There are practical
challenges and implications if cryptocurrency is viewed as money. These are,
inter alia : can one deposit cryptocurrency? Does one have to declare
cryptocurrency when entering or leaving the Republic? As pointed out in the
articl e uploaded by the respondents, cryptocurrencies “are nothing more than
codes on a digital ledger. Thus, they exist anywhere and everywhere and have
a global nature.”28 Given the punitive nature of the Excon Reg, there is no

27 The Development of Cryptocurrencies as a payment Method in South Africa by NH Hamukuaya
page 13.
28 Supra para 15.
room for an unnatural and ficti tious reading into the Regulations to cover
cryptocurrency.

[66] Did the LCC contravene Reg 10(1)(c)? When dealing with Reg10(1)(c), the
court must be mindful of the dicta in Oilwell . The court categorically stated that

“These examples show that a restrictive i nterpretation is called for,
particularly in view of the fact that any legislation that creates criminal
and administrative penalties, as the Regulations do, requires restrictive
interpretation.”29

[67] To me, on any construction, much less on a restrictive in terpretation,
cryptocurrency falls outside the ambit of capital under Reg 10(1)(c). I agree with
the counsel for the applicant that a regulatory framework addressing
cryptocurrency is long overdue. In the same way, intellectual property rights
had a niche carved for them in Excon, cryptocurrencies need some legislative
attention. Top of mind for this court is the fact that South Africa is a
constitutional democracy, a country governed by the rule of law. Courts must
not pay li p service to separation of powe rs, see Abahlali basemjondolo .

[68] Finally, Cryptocurrency has been in existence for over 15 years, one cannot
say SARB has been caught napping, because the point is abundantly made in
the academic paper:

“SARB published a position paper in 2020 that highlighted the risks
associated with cryptocurrencies such as Bitcoin, which are, inter alia :
There is a lack of proper regulatory legal framework, which
substantially increases the risk associated with the en forcement of the
principle of finality and irrevocability in the payment system;
There is no regulatory protection that would compensate the owner or
user of cryptocurrency for any loss that may be suffered

29 Oiwell at para 11.
Cryptocurrencies such as bitcoins are less suscep tible to freezing or
seizure actions by law enforcement agencies. The identification of
relevant laws applicable to the contravention and the gathering of
evidence regarding a transaction can be an unattainable task.
Exchange regulations do not govern the transfer of cryptocurrencies in
and out of South Africa. Any cross -border exchange can therefore not
be authorized by SARB.”30

Conclusion

[69] I am compelled to conclude that the LCC did not contravene the Exchange
Control Regulations regime, as it stands. It, therefore, becomes unnecessary to
deal with Regulations 22A and/or 22C. In the result, the forfeiture of the money
in the Money Market Account is set aside.

Costs

[70] In casu, both parties have enjoyed substantial success. I need hardly mention
that the award of costs is within the discretion of the court and must be
exercised judicially. In exercising my discretion, I am of the view that each party
should pay its own costs.

Order

1. The applicant’s application to set aside the R10 000 000.00 in account
number 1[...] held within Nedbank Limited together with any interest thereon or
any other accrual thereto is dismissed.

2. The third respondent’s decision published in Notice number 1637 of 2023, as
published in the Extra Ordinary Government Gazette nu mber 48111 on 24
February 2023, to declare forfeit to the State:


30 The paper pages 16 and 17.
the amount of R16 404 700.27 in account number 4[...] held with the
Standard Bank of South Africa Limited, together with any interest
thereon or any other accrual thereto is set aside.

3. Each party to pay its own costs.


___________________________
M.P MOTHA
JUDGE OF THE COURT
PRETORIA


Date of Hearing: 18 February 2025

Date of Judgment: 15 May 2025

APPEARANCES :

For the Applicant: G Engelbrecht SC and KD Iles
Instructed b y: Van Hul steyns Attorneys

For the 1st – 3rd Respondent s: KW Luderitz SC and KS Moloisane
Instructed by: GMI Attorneys Inc