The Financial Sector Conduct Authority (FSCA) has imposed a thumping set of sanctions on three senior figures associated with Africa Bitcoin Corporation (ABC), formerly Altvest, after finding that they acted together to manipulate the company’s shares.
The regulator has imposed a R5m administrative penalty on founder and CEO Warren Wheatley and WGW Capital, a company in which he was a director and which at the time owned 34% of Altvest. The alleged contravention happened shortly after Altvest’s original listing in 2022.
The FSCA also imposed a further R3m penalty on Wheatley’s wife, Tatum Keshwar-Wheatley, and Tatum Keshwar Investments, which owned about 17% of Altvest, and a R2m penalty on former chief investment officer Akshay Suresh Karan.
Keshwar-Wheatley was crowned Miss South Africa in 2008.
More damagingly, the FSCA has debarred all three individuals for 20 years, after finding that they contravened the Financial Markets Act and had “aided and abetted others” in contravening the financial sector law.
The finding could not have come at a worse time for ABC.
Africa’s first Bitcoin company was on the verge of a secondary listing on the Access segment of the Aquis Growth Market in London. The original plan was for trading to begin on 17 August, but it had been delayed.
The regulator’s finding relates to just four days of trading, between 5 September and 8 September 2022, when Altvest was still a small and thinly traded company listed on the Cape Town Stock Exchange.
According to the FSCA, Wheatley, Keshwar-Wheatley and Karan acted in concert and, through their coordinated trading, created an artificially inflated share price or a false or deceptive appearance of demand, supply or trading activity in Altvest shares.
The regulator has not, in its public statement, provided the underlying trades or explained precisely how the three accounts interacted. But the timing of the trades is nevertheless striking.
Altvest had listed on the CTSE only four months earlier, in May 2022, and was at the time trying to establish itself as an innovative investment platform offering retail investors access to private-market assets. On September 5 it launched the public offer for its first investment product, linked to the Umganu luxury lodge which was partly owned by the South African-born English cricketer Kevin Pietersen, and the next day, its shares began trading on the A2X exchange.
Wheatley, Keshwar-Wheatley and Karan all dispute the regulator’s findings, and say they intend to take the matter to the Financial Services Tribunal.
In court papers, the trio argued that the amounts involved in the trades were extremely small, and their only intention was to investigate whether tax was being applied correctly by the broker.
The FSCA, however, has rejected this explanation, and said that the amounts involved in the trades was not the issue, but rather the harm caused and the intention behind the trades.
At the time, Altvest was an illiquid share so relatively modest transactions could have a large effect on both the quoted price and the appearance of investor interest.
Terrible timing
ABC has meanwhile moved quickly to distance the operating company from the individuals involved, to limit the reputational fallout. After being told of the FSCA decision on August 30, Wheatley and Karan were placed on precautionary leave, while Keshwar-Wheatley’s consulting services were suspended.
Wheatley has also resigned from the ABC board, while all three have resigned as directors of subsidiary Altvest Credit Opportunities Fund. Stafford Masie, who until now chaired the company, has taken over as interim CEO.
The company has stressed that the sanctions were imposed on the individuals concerned and their investment vehicles, and not on ABC itself.
Nonetheless, it’s a serious setback for a company which has spent the better part of a year reinventing itself. It transferred its primary listing to the JSE, renamed itself as ABC, and adopted a Bitcoin treasury strategy.
The goal, ABC said, was to position itself as an African version of the increasingly fashionable listed Bitcoin treasury companies, most notably the US-listed Strategy.
Wheatley has been the face of this reinvention, and at the centre of plans to raise several million pounds of additional capital to expand the company’s Bitcoin holdings and investment activities.
The FSCA finding, therefore, lands precisely as the business is asking investors to place substantially greater faith in its management, governance and capital allocation.
The outstanding issue now is whether the Financial Services Tribunal suspends or overturns any part of the FSCA decision.
Until then, however, the regulator’s orders remain in force, leaving ABC attempting to build its new Bitcoin-focused business without the founder who has been its dominant public face.
