THE NEED FOR VIGILANCE IN BANKING TRANSACTIONS IN THE LIGHT OF PREVALENT FRAUD, MISREPRESENTATION AND PONZI SCHEMES IN THE BUSINESS WORLD The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas Case 323/12  ZASCA 19 Unreported
Keywords:fraudulent Ponzi schemes, financial transactions
Numerous persons are inclined to take a risk by making short-term investments that promise substantial profit returns within the shortest
possible time. In this respect people take a gamble and try their luck at whatever opportunity that presents itself. With this growing trend has also arisen fraudsters, whose business is to prey on possible investors by making investments in non-existent business ventures, and large numbers of “investors” have lost vast amounts of money in these get-rich quick schemes. One such example is found in the recent SCA decision of The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas (The Trustees of the Insolvent Estate of Grahame Ernest John Whitehead v Dumas GNP (unreported) 2013-03-20 Case no 323/12). The case involved a specialist medical practitioner, Dumas, who made an investment into a fraudulent scheme, having been misled through a misrepresentation by an agent of Whitehead, mastermind behind the
fraudulent Ponzi scheme. As a result thereof, Dumas lost a couple of million Rands into the insolvent estate of Whitehead. As illustrated by this case note and the age-old adage that says “a fool and his money are soon parted”, unwary persons could easily lose their hard-earned money. Hence, this case note seeks to enlighten would-be investors of the pitfalls of Ponzi schemes, such as huge financial loss as was experienced by Dumas, and encourage vigilance in making financial transactions. This it does through a critical examination of the Dumas judgment. It especially concerns the legal principles pertaining to monies that are transferred from one bank account to another bank account owing to fraudulent misrepresentation. Primarily, the case note takes a critical view of the manner in which the court applied these
legal principles. While the court, in the authors’ view, properly set out the legal framework, which is sound and correct, it nevertheless went wrong in its application of the law. Therefore, the authors contend that, judged from these very legal principles that the court set out, it nevertheless came to an incorrect conclusion. If left unchallenged, the effect of the judgment will be to set a precedent inappropriately and wrongly that could amount to an unwarranted curtailment of legal protection afforded to persons who are induced by fraud and misrepresentation to transfer money into other people’s bank accounts. In this case note the authors examine the canards of the judges’ reasoning leading up to their decision. As a starting point we examine the factual background of the case, then we move on to the critique and we conclude with the advice.
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