Edwin Dande, the man behind Sh15bn Cytonn con game lures more clients
Erich Weisz, the Hungarian-American master of deception – better known as Harry Houdini – died on October 31, 1926 after a 35-year-long career that saw him labelled the greatest magician and escape artist of all time.
Houdini’s acts as a magician saw him dazzle even the most skeptical human beings, and made some believe that his achievements were supernatural.
It was only after his death that some secrets on his escape acts started to emerge.
For instance, a loose link in the chains that would bind him during an act, or hiding keys in his hair to unlock restraints and subsequently amaze audiences.
To prove his invincibility, Houdini once asked university student Jocelyn Gordon McGill to strike his abdomen several times and that there would be no pain.
After several blows, Houdini finally stopped the university student as another punch was mid-air. As it turned out, Houdini was at the time suffering from appendicitis and the blows to his abdomen escalated the condition and led to his death.
In August 2014, Edwin Harold Dayan Dande started his career as corporate Kenya’s Harry Houdini with his Cytonn Investments.
Mr Dande managed to persuade more than 4,000 individuals and a group of foreign corporate investors to put billions into his wide array of projects.
Mr Dande and his friends started incorporating investment companies under his Cytonn Group, promising high reward for investors who were willing to take low risks by simply pumping their money into the various products on offer, and leaving the rest to him and his team.
Two weeks ago, High Court judge Alfred Mabeya saw through Mr Dande’s nine-year-old gimmicks and called an end to the grand illusion by ordering for the liquidation of Cytonn High Yields Solutions LLP (CHYS) and Cytonn Real Estate Project Notes LLP (CPN) – the bread and butter of Mr Dande’s Cytonn Group.
The judge’s decision followed an insolvency petition by four Cytonn High Yields Solutions investors who have now become the Jocelyn Gordon McGinn of Mr Dande’s story.
And just like Houdini, some of the gimmicks Cytonn has employed in the past decade are coming to light after the liquidation order.
In this case, Mr Dande’s silver tongue is what loose chain links were to Houdini. Mr Dande seems to have the skill and capability to sell ice to Alaskans.
On his personal social media pages, he aggressively promoted Cytonn and its products, thereby convincing the brightest minds.
Lawyers, doctors, accountants and other professionals placed their feet on the bear trap that snapped mercilessly just a short while afterwards.
Harry Houdini’s funeral was attended by an estimated 2,000 people.
The funeral of CHYS and CPN will have more than double the number of mourners as investors, lenders and other creditors hover around the grave that is liquidation, in the hope of recovering even a pittance of their dues.
But unlike Houdini’s funeral, majority of mourners will be filled with anger, not sorrow.
An unremorseful Mr Dande, when reached for comment, held that Justice Mabeya and investors are the ones who have sealed the undesirable fate of CHYS and CPN.
In a telephone interview with the Sunday Nation, Mr Dande said that Cytonn Investments Management PLC will continue with its business despite the damning High Court ruling that has spelled the end for its sister companies.
“The investors already decided to terminate CHYS/CPN when they voted to take them into administration in 2021. The administration did not progress. The judge then chose to terminate CHYS/CPN through the official receiver. Our next course of action is as before – to offer the official receiver the same support we offered the administrator to end CHYS/CPN as per the investors’ resolution.
“Cytonn group will continue with its business of real estate development, real estate management, hospitality and regulated fund management,” Mr Dande said. He insists that Justice Mabeya did not allege any fraud on the part of the Cytonn Group.
Despite the intensely sophisticated modus operandi of companies and products under the Cytonn Investment Management PLC, Mr Dande’s operations have a stark resemblance to those of pyramid schemes.
For starters, most investors were not informed that CHYS and CPN were independent of the parent company.
Justice Mabeya put an end to this confusion by stating that “they are all Cytonns”. The judge’s words mean that Mr Dande and his group can no longer use the separate registration of products under different companies to confuse members of the public
Pyramid scheme
The second trick Cytonn used was spreading disinformation to create confusion over whether the CHYS and CPN products were regulated by the Capital Markets Authority.
The most obvious similarity with pyramid schemes, however, is how Cytonn paid the early adopter’s dues handsomely and on time, but sunk with billions of the Johnny-come-lately.
On the authority of Justice Mabeya’s ruling, it is not a stretch to call the two Cytonn products one of the biggest fraud schemes in Kenya’s history.
Mr Dande resigned from British American Asset Managers (BAAM), an investment unit of the Britam group, alongside three colleagues – Shiv Arora, Elizabeth Nkukuu and Patricia Wanjama – in August 2014 as they sought to compete with their former employer.
They registered a number of companies under their Cytonn Investments Group, and even did the unthinkable when they snapped up one of their employer’s newest clients – Acorn Group – that intended to pump Sh40 billion in various real estate projects.
“The original plan was for BAAM to raise funds for our real estate projects. But when the core team left, we decided to work with the original team which was involved in the development of the projects,” Acorn Group CEO Edward Kirathe said at the time.
Cytonn is largely made up of two investment arms – Cytonn High Yields Solutions that promised to invest funds it collected from the public and give returns of up to 18 per cent, and a guarantee of low risks. This arm collected over Sh11 billion from 3,116 investors over the years.
Cytonn Real Estate Project Notes was to be a typical property development investment. Buy property off plan and reap the benefits in whichever way you wish, be it by renting out or moving in. The project collected Sh4.1 billion from 886 investors over the years.
Mr Dande’s group seemed to be living the dream. But Britam Group was livid and filed five civil cases against Cytonn, its owners and the Acorn Group claiming fraud and accusing the Dande quartet of siphoning Sh4 billion from its former employer.
Britam’s subsidiary, BAAM, also sought criminal charges against the Dande four.
BAAM also filed a formal complaint with the Institute of Certified Public Accountants of Kenya (ICPAK) against former portfolio manager, Elizabeth Nkukuu.
Similar complaints were filed with the LSK against former head of legal Patricia Wanjama and the Institute of Certified Financial Analysts (ICFA) against Mr Arora. The complaints were, however, unsuccessful.
For years, Mr Dande and his colleagues claimed that Britam was on a vicious witch hunt and living in fear of competition from a young crop of investment experts.This claim may have played a big part in netting sympathy and, possibly, several investors.
When BAAM opted to drop its suit against Acorn, Cytonn went on an offensive claiming that Mr Dande, Mr Arora, Ms Wanjama and Ms Nkukuu were off the hook. This was another opportunity for Mr Dande to net more clients for Cytonn.
The High Court and Court of Appeal have since ruled that BAAM and the Director of Public Prosecutions are free to pursue criminal charges against the four.
Mr Dande is the face and voice of the Cytonn group. He jealously guarded the Group’s reputation and was highly litigious. From media to investors and the general public, anyone who dared speak ill of Cytonn and its products would face a defamation suit.
Not even the Capital Markets Authority (CMA), which sought to warn investors of the unregulated nature of Cytonn High Yields Solutions, was spared.
The CMA had also indicated that Mr Dande was facing professional misconduct accusations. The High Court last year issued orders barring the CMA and its boss Wycliffe Shamiah from uttering such statements pending determination of the defamation suit.
Mr Dande also went after some clients who tried to raise alarm on social media, such as John Bosco Matheka.
He often dared anyone to say anything negative about Cytonn, warning that he would sue for defamation.
But just like McGill in Mr Houdini’s story, a section of creditors like John Bosco Matheka, Michael Mutua Mwinzi, Stephen Kibuga Gakuo, Joel Jamenya Amusavi, Martha Waweru and Charles Munyua opted to strike their blows through court affidavits.
Mr Matheka, a pilot and official of the Kenya Airline Pilots Association (KALPA), had also faced Mr Dande’s wrath when he raised concerns with delays in processing his investment proceeds that had fallen due months earlier.
By 2020 when Cytonn’s Houdini-like illusion started to fall apart on account of numerous court cases and wrangles with clients that played out in the public domain, the group had managed to get at least 4,000 investors to pump close to 15 billion in various products.
Broken promises
After fooling thousands and gagging critics for years, the Covid-19 pandemic gave Mr Dande and Cytonn a new way to calm investors whose patience had started wearing thin.
At the time, billions were due to investors who had staked their cash up to three years earlier, and they wanted their money.
Mr Dande was quick to blame the pandemic, despite giving assurances to investors that they would get their cash.
In 2021, two foreign firms filed separate suits against Cytonn, seeking to recall loans issued to Cytonn totaling Sh5.1 billion.
Finnish-owned TT Africa and Taaleri Afrikka Rahasto II KY asked the court to allow them take adverse action to recover their money.
In 2018, Cytonn had asked the Finnish firms to restructure the loans, receive part payment in money it would collect from investors and await completion of two real estate projects in Karen to avail cash for the balance.
Investors were promised that sale proceeds from Karen’s Situ Village and Amara Ridge would pay their dues.
Neither of the promises were honoured as the loans remained defaulted and investors did not get their dues.
In July 2020, Cytonn’s Chief Operating Officer Shiv Arora left his position in the group barely five months after the cookie started to crumble.
Just under two months later, he was appointed CEO of another real estate firm, Superior Homes.
Cytonn had in 2017 bought a 25 per cent stake in Superior Homes, but it is still unclear whether the move to the latter company was a strategic play by the Dande group. Mr Arora is a full-time employee of Superior Homes.
For the remainder of 2020, Mr Dande and Cytonn continued to promise investors that the company was stable but only slightly struggling under the effects of the Covid-19 pandemic.
By this time, several investors had made attempts to file insolvency petitions against some of the companies under the Cytonn Group.
George Kirigi Thogo filed a petition against Cytonn Investments Management PLC, the parent firm, which promised to take responsibility over CHYS and CPN. When he filed the petition, he was owed Sh14.2 million. Justice Abigail Mshila dismissed his application a year later.
Jane Gathoni Ng’ang’a filed an insolvency petition against CHYS in October, 2021 but the suit was dismissed by Justice Mabeya who said she should have sought reliefs in the case Cytonn had filed seeking administration.
Humphrey Murimi Muriithi (Sh34.3 million), Rosemary Wairim Kioni (Sh14.8 million), Maureen Wanjiku Gitata (Sh1.1 million), Ezekiel Odera (Sh6.4 million), Emma Waitherero Njenga (Sh21.5 million), David Kirimi Muthuku and Anthony Kinyanjui Waringa (Sh12.6 million) are among investors who separately tried to have Cytonn’s products liquidated.
Threat of insolvency
In October 2021, the two Cytonn products and Mr Dande hit investors with a shocker when they moved to court and sought that CHYS and CPN be placed under administration, as they were immensely struggling under effects of the Covid-19 pandemic.
In a paradoxical argument, the two unregulated products blamed regulatory attacks as a reason for their slump. They also blamed bad publicity which ironically stemmed from their failure to honour promises to investors.
Despite protests from creditors, insolvency practitioner Kereto Marima was appointed administrator of the CHYS and CPN products by the High Court. The High Court had been tricked, in perhaps a last-ditch effort to keep the gravy train running.
Neither the two Cytonn products nor Mr Marima informed Justice Mabeya of a gross conflict of interest that the judge has now brought out in his order for liquidation. Mr Marima had done business with Cytonn two months before the firm’s subsidiaries asked the court to appoint an administrator.
The risk of allowing a conflict of interest to play out happened with the Cytonn products, as Mr Dande and his crew continued with their fraudulent actions.
Justice Mabeya however sniffed out the collusion between Cytonn’s owners and Mr Marima, noting that the best way out was to liquidate CHYS and CPN.
Liquidation orders
“The court notes that the original period of 12 months of administration has come to an end. Nothing substantial has been done. Monies in excess of Sh11 billion contributed by members of the public has sunk and not a dime has been recovered or any effort showed by the administrator to recover the same. He is dilly dallying and doing absolutely nothing towards achieving any objectives of the administration.
“The SPVs (special purpose vehicles) are under the control and direction of Edwin H. Dande, the CEO of the company. They are all “Cytonns”. It is clear to this court that the actions and inactions of the administrator were not in the best interest of the creditors. The administrator was shielding the promoters of the company instead of acting in the best interest of the company and creditors,” Justice Mabeya said before ordering for liquidation.
Interestingly, Cytonn co-founder Patricia Wanjama was somehow appointed a statutory manager of CHYS, despite the most obvious conflict of interest.
Justice Mabeya ordered that the 11 real estate projects identified in court papers and which were to churn Sh5.8 billion for investors, be frozen pending conclusion of the liquidation of CHYS and CPN.
The judge was not clear on whether the properties will be liquidated. He argued that the special purpose vehicles putting up the developments may be separate from CHYS and CPN, but that the actual projects are not.
But even with the writing on the wall, Mr Dande has refused to go down without a fight, accusing media of misreporting Justice Mabeya’s ruling and orders.
Perhaps the widest difference between the two Cytonn products and pyramid schemes is that proprietors of the latter often know when to stop. On January 20, 2023 – two weeks after Justice Mabeya’s ruling – Mr Dande used his social media pages to attract clients.
“The dream of creating a comprehensive residential development that would provide all amenities was what was in mind when #TheAlmaByCytonn was born in 2016. Be the first to know when a vacancy arises by joining our rental waiting list,” Mr Dande tweeted on Thursday.
He has also been marketing Cysuites Apartment Hotel, which is also on the Official Receiver’s list.
The Alma is among the real estate projects that were frozen pending liquidation. BY DAILY NATION
Post a Comment