3 banks hand over Shs7.5b from D9 Club to URSB

Saturday May 25 2019
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D9 Club, started by Mr Smart Protus Magara, pooled money from intending investors with the promise of multiplying it through investments. FILE/COURTESY PHOTO

Kampala. At least three commercial banks have handed over $2m (Shs7.48b) to Uganda Registration Services Bureau (URSB), which was recently appointed receiver of D9 Club of Entrepreneurs, charged with reimbursing the money the entity had solicited from people.
D9 Club, started by Mr Smart Protus Magara, pooled money from intending investors with the promise of multiplying it through investments.

The initiative was, however, later suspected to be a ponzi scheme and, amid mounting fears that the proprietor could fleece contributions.
Security got involved and 213 people, who had invested in it, sued the proprietor with the view of regaining their monies. The initiative’s bank accounts were seized.

On March 13, the High Court in Kampala appointed Mr Bemanya Twebaze of URSB the official receiver of D9 Club to oversee the disbursement of the monies deposited on D9 Club’s accounts.
“We have so far received $2m that we are supposed to give back to the owners, but the process is still on hold because Mr Magara obtained a stay of execution,” Mr Mustapher Ntale, the URSB manager in-charge of liquidation, said in an interview.

Mr Ntale explained that Mr Magara got a stay of execution with the hope of appealing the High Court decision that ordered the liquidation of the club.
“Take notice that on the 13th day of March 2019, court made an order, appointing the Official Receiver to receive all funds on the first applicants’ frozen bank accounts and make payments to the claimants in the matter,” a public notice that was published in the Daily Monitor late last month stated.

“…by the time the order came, the money had already been deposited into our accounts save for a few banks who are yet to respond. So until I get a contrary order, I am supposed to stay the execution,” Mr Ntale said.
Last month URSB wrote to Equity Bank, Stanbic Bank, Bank of Africa and Bank of Uganda to release funds held on Mr Magara’s frozen accounts to the official receiver.

In 2017, on request by the Financial Intelligence Authority (FIA), which fights money laundering, Bank of Uganda ordered commercial banks to freeze all D9 Club accounts, saying the coordinator, Mr Magara, was operating in a manner akin to a pyramid scheme.
“What I can tell you is that we have so far received over 1,000 claimants but we cannot go ahead and give them the money until court pronounces itself on the matter,” Mr Ntale said.
According to Mr Ntale, the receiver will in the meantime verify the claims that were filed by April 30 as he waits for court’s decision.

Background
In June 2017, Bank of Uganda on the advice of FIA ordered commercial banks to freeze D9 company accounts for operating like a pyramid scheme.
A pyramid scheme is a form of investment in which each paying participant recruits two further participants with returns being given to early participants using money contributed by later ones.
The practice is illegal in a number of countries because it is seen as manipulative.

The move pushed Mr Magara and 138 individuals, who had invested their money in D9 Club, to sue Financial Intelligence Authority in 2018.
Though it is not yet clear how much money is being held on Mr Magara’s bank accounts. Our sources in police put the figure to $2.6m, adding that up to 10,000 people might have invested $7m in the D9 pyramid scheme before it collapsed.

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Following the collapse of the scheme, the police instituted investigations of money laundering, obtaining by false pretence and illegal deposit taking but the DPP directed them not to charge but advise the 700 complainants to go civil.
D9 Club was brought to Uganda from Brazil in 2016 by Mr Magara where it was being promoted by Mr Danilo Santana.

tmalaba@ug.nationmedia.com

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