Summary of Judgment

Introduction

The matter concerned an application on the return day for the granting of a final winding-up (liquidation) order against the first respondent, Banxso (Pty) Ltd (in provisional liquidation). The application followed upon the granting of a provisional winding-up order by the same court on 22 August 2025, and the judgment on the return day was delivered on 2 March 2026.

The applicants were twelve investors who had traded in Contracts for Difference (CFDs) on Banxso’s platform and alleged that they suffered substantial losses. Banxso opposed the granting of a final liquidation order. The cited respondents also included the Financial Intelligence Centre, the Financial Sector Conduct Authority (FSCA), the National Director of Public Prosecutions, and Hassen Kajie in his capacity as curator bonis appointed in terms of section 42 of POCA.

The dispute fell within the law of corporate liquidation and concerned whether Banxso should be finally wound up on grounds of inability to pay its debts (commercial insolvency), whether it was just and equitable to wind it up due to illegality and fraud, and whether Banxso had suffered a loss of substratum. Banxso also raised an ancillary challenge that the proceedings constituted an abuse of process, focused on alleged misconduct and conflicts of interest involving the applicants’ attorneys.

Material Facts

Banxso had been a licensed financial services provider (FSP), but its licence was provisionally withdrawn by the FSCA on 15 October 2024 and finally withdrawn on 4 July 2025. The FSCA’s stated basis for withdrawal was that Banxso had materially contravened financial sector laws and posed a risk to the public. It was common cause in the final-stage proceedings that Banxso had been unable to trade legally since October 2024.

The applicants’ case was presented against a broader factual background in which they alleged that investors were enticed through “deepfake” advertisements featuring prominent individuals and unrealistic returns, leading investors to deposit funds into Banxso’s accounts, often after engagement with Banxso “success managers”, and thereafter suffering near-total losses. The court treated the overarching theme of unlawful and deceptive conduct as central to the “just and equitable” enquiry, particularly where supported by the FSCA’s regulatory findings and analysis referenced in the judgment.

Following the grant of the provisional liquidation order, Banxso’s position deteriorated in ways the court considered material. A further claim was instituted by Banxso’s liquidity provider, Flamingo Clearing House Limited (Flamingo), in the amount of R67,239,005, which the court recorded as having not been previously disclosed notwithstanding common shareholding connections between Banxso and Flamingo. The court also noted that Flamingo had approached the court ex parte, without notice to Banxso’s provisional liquidators, to authorise a commission of enquiry into Banxso’s affairs.

On the operational facts relevant to substratum and solvency, the court accepted that Banxso’s business had come to a standstill: it had no employees, no business premises, investor trading positions had been closed, and access to trading platforms had been terminated. The judgment recorded that the applicants relied, as further evidence by agreement, on an FSCA press statement of 9 December 2025 confirming severe administrative penalties of approximately R2 billion imposed on Banxso (in provisional liquidation) and two of its directors, jointly and severally, as well as penalties, debarring periods, and fines imposed on other individuals connected to Banxso.

On indebtedness, the court recorded that the applicants had established claims totalling R70,371,175, said to be based on Banxso’s own refund policy and an admission that trades after the licence withdrawal were simulated and the funds repayable. Adding Flamingo’s claim of R67,239,005, the court treated the total liabilities as exceeding R137 million. Against this, Banxso’s available funds in bank accounts were recorded as approximately R69.97 million, leaving a recorded shortfall of over R67 million.

Banxso disputed the validity of the applicants’ claims, contending they were not proven, and emphasised that it had repeatedly offered to provide full security for the claims of Wentzel and intervening parties, to be held in its attorneys’ trust account pending prosecution of the claims. Banxso also asserted that its solvency and ability to continue as a service provider remained possible because the licence withdrawal was subject to a reconsideration application, and that its client book remained a valuable asset which could, if necessary, be sold to another FSP.

A further factual feature relevant to solvency was that, in the Flamingo ex parte application, one of Banxso’s stakeholders went under oath and recorded that Banxso was unable to pay its debts, a fact the court treated as undermining Banxso’s assurances that stakeholders remained available to settle legitimate claims.

Legal Issues

The central questions the court was required to determine were whether the applicants had discharged the onus, on a balance of probabilities, to justify a final winding-up order under section 344(h) read with section 345 of the Companies Act 61 of 1973, read with item 9 of Schedule 5 to the Companies Act 71 of 2008.

Within that overarching enquiry, the court was required to determine whether Banxso was commercially insolvent (unable to pay its debts), whether it was just and equitable to wind up Banxso due to alleged illegality and fraudulent conduct underpinning its business model, and whether Banxso had suffered a loss of substratum in circumstances where its licence had been withdrawn and it could not lawfully conduct its core business.

The dispute required determinations involving the application of legal principles to fact at final winding-up stage, including the approach to factual disputes under the Plascon-Evans rule, and the limitation on winding-up proceedings where a debt is bona fide and reasonably disputed under the Badenhorst principle. The court also exercised a value judgment in the “just and equitable” enquiry, particularly in assessing the impact of alleged systemic illegality and investor harm, and in evaluating whether allegations of attorney misconduct amounted to an abuse of process sufficient to defeat an otherwise substantiated liquidation case.

Court’s Reasoning

The court located the application within the established final winding-up framework. It held that the applicants bore the onus to satisfy the court, on a balance of probabilities, that a final liquidation order should issue. At the final stage, the court applied the Plascon-Evans approach to factual disputes, accepting the respondent’s version unless it was so far-fetched or untenable that it could be rejected. The court further recognised the Badenhorst principle, namely that winding-up proceedings are not the appropriate mechanism to resolve a genuine and reasonably disputed debt.

On commercial insolvency, the court treated the quantum of the applicants’ claims and the additional Flamingo claim as materially exceeding Banxso’s accessible bank funds, producing a significant shortfall. Although Banxso relied on its offer of security and disputed the claims, the court acknowledged that an offer of security is an important indicator and that a solvent company may dispute a claim while offering security. However, the court found Banxso’s broad assertion of solvency “highly questionable” when assessed alongside the cessation of operations, the absence of premises and employees, and the fact that a stakeholder had gone on oath indicating inability to pay debts. The court also considered the FSCA’s analysis and concluded that, on the probabilities and applying the Plascon-Evans principle, Banxso was factually and commercially hopelessly insolvent.

On the just and equitable ground grounded in illegality and fraud, the court evaluated Banxso’s defences, including its contention that it operated as an STP broker, that enrichment vested in separate offshore liquidity providers, that corporate separateness should be respected, and that it was itself a victim of parasitic cyber-attack marketing linked to the Immediate Matrix (IM) scheme. The court held that these contentions carried little weight in the face of the FSCA’s forensic analysis of bank accounts, which the court described as comprehensive and compelling evidence that the business was not conducted as represented. The court emphasised factors including co-mingling of funds, use of client funds for operational expenses, and channeling of substantial sums into cryptocurrency wallets under Banxso’s control rather than to genuine independent liquidity providers, which undermined the purported STP model. The court also highlighted the relationship with Flamingo as a connected liquidity provider and treated this as rendering trading a zero-sum interaction between a client and a commonly controlled entity, which was “at first glance deceptive.”

The court further reasoned that the link between deepfake advertisements and Banxso’s onboarding process was too direct, and too lucrative, for Banxso plausibly to portray itself as an innocent victim, particularly where the evidence indicated Banxso continued to benefit long after becoming aware of the marketing fraud. It treated as especially disturbing the evidence that Banxso’s representatives provided false information to clients about licensing status and interest rates, and that business solicitation continued even after licence withdrawal. Specific examples referenced in the judgment included misstatements made to the first applicant about Banxso’s licensing and its ability to offer interest “like a bank,” and concessions about statements made to clients after the provisional suspension of the licence suggesting that Banxso’s licence was no longer suspended and that usual operations would resume shortly. Against this factual matrix, the court considered there to be strong evidence of contraventions of financial sector laws, including operating without a licence and offering interest-like products without being registered as a bank.

In addressing the applicants’ reliance on condictio ob turpem, the court held that, on the probabilities, the requirements were met, with a strong prima facie case that underlying agreements were illegal due to multiple statutory contraventions and fraudulent misrepresentations. On enrichment, the court noted Banxso’s contention that a liquidity provider was enriched, but considered that the related-party structure and the flow of funds to cryptocurrency wallets linked to Banxso’s operations suggested that the Banxso group, as a whole, was unjustly enriched at investors’ expense. The court also considered the scale of alleged illegality—affecting thousands of investors and involving hundreds of millions of rand—and concluded that Banxso’s claimed “regularisation” efforts were unconvincing when set against the systemic nature of the conduct described. It reasoned that the availability of regulatory remedies did not bar liquidation proceedings in circumstances of egregious activity, and it treated the public interest in protecting investors and maintaining the integrity of the financial system as a relevant factor.

On loss of substratum, the court accepted that Banxso’s main object had been to act as a licensed financial services provider, but that it had no licence, no premises, no employees, and was inactive, with assets such as the client book frozen. Although Banxso was challenging the licence withdrawal, the court treated this as a speculative future possibility and held that the present reality was that Banxso could not legally or practically conduct the business it was formed to perform, providing further support for a just and equitable winding-up.

On the alleged abuse of process premised on the conduct and conflicts of interest of the applicants’ attorneys, Mostert & Bosman (M&B), the court acknowledged that the allegations were serious and might warrant scrutiny by professional bodies. Nonetheless, it held that they did not invalidate the substantive liquidation grounds, emphasising that the core enquiry was whether the company should be wound up based on its financial state and conduct. The court reasoned that much of the compelling evidence of widespread illegality and fraud, including evidence sourced from independent regulators such as the FSCA, existed independently of M&B’s conduct. It held that if grounds for liquidation were made out, the application should not be dismissed merely because attorneys advancing it were alleged to have ulterior motives; the appropriate remedy would lie in costs or professional discipline rather than permitting an allegedly unlawful enterprise to continue. The court also rejected the suggestion that it should revisit the earlier strike-out decision from the provisional proceedings.

Outcome and Relief

The court held that the applicants had convincingly established, on a balance of probabilities, that Banxso should be placed into final liquidation.

The court ordered that Banxso (Pty) Ltd be placed under final liquidation. It further ordered that the applicants’ costs, including costs consequent upon the employment of two counsel, would be costs in the liquidation.

Cases Cited

Electrolux South Africa (Pty) Ltd v Rentek Consulting (Pty) Ltd 2023 (6) 452 (WCC) 461A.

Swart and Others v Fourie and Others (2488/2017) [2017] ZAWCHC 58 (22 May 2017).

Legislation Cited

Companies Act 61 of 1973, section 344(h) and section 345.

Companies Act 71 of 2008, Schedule 5 item 9.

Prevention of Organised Crime Act 121 of 1998, section 42.

Financial Sector Regulation Act 9 of 2017.

Banks Act 94 of 1990.

Rules of Court Cited

No specific rule of court was expressly cited in the judgment.

Held

The court found that Banxso was commercially insolvent on the probabilities, notwithstanding its offer to provide security, given the scale of liabilities relative to available funds and the practical collapse of its operations. The court further found that it was just and equitable to wind up Banxso due to overwhelming evidence of illegality and fraudulent conduct supported by the FSCA’s forensic analysis and regulatory action, including misleading representations to clients and continued solicitation after licence withdrawal. The court also found that Banxso had lost its substratum because it could no longer legally or practically carry on the licensed financial services business for which it existed.

The court held that allegations of abuse of process and conflicts involving the applicants’ attorneys, while serious, did not defeat the substantive grounds for liquidation; any remedy lay elsewhere (including potential costs consequences or professional oversight), and not in refusing liquidation where the grounds were established.

LEGAL PRINCIPLES

The granting of a final winding-up order requires the applicant to satisfy the court on a balance of probabilities that a statutory ground for winding-up exists, including that it is just and equitable within the meaning of section 344 of the Companies Act 61 of 1973 read with section 345.

At the final stage, factual disputes are approached in accordance with the Plascon-Evans principle, under which the respondent’s version is accepted unless it is so far-fetched or untenable that it can be rejected on the papers.

Under the Badenhorst principle, winding-up proceedings are not suited to determine a debt that is bona fide and reasonably disputed. The court nevertheless assesses whether the dispute is genuine and whether the overall evidence establishes inability to pay debts or just and equitable grounds.

An offer of security for a disputed claim is a relevant factor when assessing commercial solvency, but it is not decisive where the company’s operational reality, liabilities, and surrounding circumstances demonstrate inability to pay debts.

A company may be wound up on a just and equitable basis where the evidence establishes systemic illegality and fraud in its business operations, and where the public interest considerations relevant to investor protection and the integrity of the financial system are engaged on the facts.

A loss of substratum supports a just and equitable winding-up where it has become impossible for the company to achieve the main object for which it was formed, particularly where it cannot legally conduct the business central to its existence.

Allegations that liquidation proceedings are an abuse of process due to attorney conduct or conflict, even if serious, do not in themselves negate an otherwise established basis for winding-up; the appropriate responses may include professional scrutiny and cost orders rather than refusal of liquidation where the statutory grounds are met.