It doesn’t go a month without a story of an investor running shoulders with Cytonn for a company that battles so many suits, Cytonn’s legal team probably spends more time in court than in office cutting deals.
For Edwin Dande a man who was once profiled by Forbes as the entrepreneur who built $800M asset management firm(Cytonn), controversy and challenging cases against him and the company is not anything new.
Alongside other cofounders of the firm; Elizabeth Nkukuu, Patricia Wanjama, and Shiv Arora, Britam, where the group previously worked before forming Cytonn, accused their former employers of colluding to defraud them Sh7B in a criminal case that has seen the CEO fight like hell.
Britam claimed that the four Cytonn directors transferred Sh7 billion from a client account to their own firm(Cytonn) before resigning.
He withered the storm, termed the cases as total witch-hunt.
A Google search of the company will bring you a heap of not so good news for a potential investor doing their due diligence on the investment firm.
One will run into headlines like Cytonn bleeds as key investors pull out funds with the firm promptly refuting the same. Or you’ll meet another article, Cytonn in race against time to pay frightened investors and again they’d find calming words to ease the nerves. Cytonn blocks investors from pulling cash out of its real estate fund another headline that pops up on the searches. Or you’ll be reminded of the long wars that the firm has been having with the market regulatory body with headlines such us Cytonn, CMA and investor embroiled in court war appearing on your search results. You’ll also find other articles on the same topic such as Cytonn accused of flouting CMA regulations in cash call and or Investors report Cytonn to CMA over Sh122m default, CMA, Cytonn in Legal Tussle Over KSh 717.3 Million Unit Trust Fund or even more alarming headline news like CBK Warns Fund Managers As Cytonn, Faces Inability To Pay Returns. Or allegations of Amara Ridge in Karen being a project funded by former AG Amos Wako in the pretext of Cytonn, a lot is written on the web.
The company has also been a center of focus in the investors forums such as Wazua where it has one of the longest threads highlighting not so good reviews from participants.
With all manner of accusations of being ‘shortchanged’ allegations of the firm ‘collapsing’ Dande the company’s CEO is not sitting back and instead putting a fight. Dande in a recent fired a warning shot to those posting negative stories about his firm on the internet terming them as ‘misinformation’.
“For way too long, we have watched false statements made about Cytonn, to the detriment of the interests of our investors. As Saitoti once said, “there come a time”, and the time to protect the interests of our investors against defamation has come.” Said Dande.
“Whether a blogger, a journalist, a client, WhatsApp group administrator peddling false statements, note that we shall now sue aggressively against defamation. This is not a threat, I shall deliver. Go ask Britam or Wairegi about their false statement that I stole from Britam, hawatarudia tena.” He fired the salvo.
“We shall be offering ample opportunity for these writers to explain who are these clients that moved 250 m, who are these key investors that pulled out, etc. I am only concerned about false information. In summary, defamation is expensive just stop it. Brands are incredibly hard to build.” Dande warned!
And true to his words, Cytonn recently sent a cease and desist letter to John Bosco Matheka.
The letter sent to a John Bosco Matheka (Jaybee Matheka) accused him of publishing defamatory articles against the firm.
“It was brought to our attention that you without proof or reasonable presumption on which to base your statements, published or caused to be published under your social media platforms various articles seeking to discredit the authenticity of the company and its operations’, the cease and desist notice read in part.
According to sources, John Bosco Matheka is a pilot and one of Cytonn’s clients who are irate and anxious about their investments that have been stuck with the firm since April 2020.
‘Cytonn Investments has chosen to sue a Kenyan pilot after he chose to vent his frustrations with the company on his social media pages over their failure to commit to refund his investments with the firm running into millions of shillings. Do you think Cytonn has any moral justifications to do this?This case should be very interesting for would be investors in Kenya’, Jaybee Matheka posted on his Facebook page.
Cytonn blamed the lack of payment of dues to ‘reduction in construction activities’. This came at a time when the covid-19 pandemic was just starting.
In 2019, Cytonn sued a Twitter user Jackie Arkle over a ‘defamatory’ tweet for her, she thought she was exposing their environmental destruction of OLOLUA forest and also the forest on a property off Miotoni road in Karen.
Cytonn had planned to build houses that allegedly didn’t conform to the bylaws of Karen. Cytonn was accused of not inviting the community for consultations and allegedly got their approval signatures from regular passersby like domestic workers, Maasai herders, etc but not from bona-fide residents of Karen ward.
Faced with little options, the lady reportedly apologized for the tweets exposing Cytonn and slapped with a Sh200K bill which she paid under duress after Cytonn threatened to commit her to 6 months civil jail for contempt.
Why on earth would you folks allow such to happen? Shame on you all. @NemaKenya @EACCKenya @environment_kenya @TransportKE @DPPS_KE @NairobiWater raw sewage flowing into the bypass. Why are you killing people?? pic.twitter.com/lUU9E5H6jx— Hon. William Kabogo (@honkabogo) June 15, 2020
The contested construction in Karen and Oloolua forest has yet to put Cytonn into books.
Cytonn has also sued one of Kenya’s top business blogs, Kenyan Wall Street which has been consistent in exposing the underlinings of the firm.
By September 2020, the firm was separately sued by businessmen.
In a suit at filed the High Court in Nakuru, Kenneth Maweu Kasinga, through Konosi and Company Advocates, has sued Cytonn Investments over his unpaid investment dues.
In his affidavit, the plaintiff argues that Cytonn failed to honor the investment agreement that stated that he was to be made a partner and that Cytonn would process payments for his investments within three working days upon his investment’s maturity.
At Nairobi’s High Court Commercial and Admiralty Division, George Kirigi Thogo filed an insolvency petition. Mr Kirigi who had invested Sh12,994,883 wanted the firm wound up over failure to pay Sh14 million upon maturity of funds in one of its pools.
In December 2020, three businessmen wrote to Cytonn demanding over Sh6 million arising out of an investment they made in the company failure to which they have threatened to file a winding-up petition against the company in 21 days.
“Take notice that if the aforementioned amounts are not remitted to us in full within 21 days from the date of receipt of this Notice, time being of the essence, you will be deemed to have been unable to pay your debts within the meaning of Section 514 (1) (b) of the Insolvency Act.” According to the Star Newspaper.
In September 2020, having waited for their investments in vain, investors filed complaints with the Capital Market Authority (CMA) against Cytonn for failure to pay Sh122.8 million upon maturity of funds in one of its pools.
The 13 investors claimed Cytonn had delayed payments of between Sh500,000 and Sh25 million. This prompted CMA to petition the courts in the push to bar Cytonn from putting more cash in real estate projects.
The regulator expressed its concern that Cytonn High Yield Solutions (CHYS), one of the funds managed by the firm and debt security raised from investors dubbed Cytonn Project Notes pose risks to investing public.
It is at the backdrop of all this that the company has had to consistently have to defend themselves against the accusations of it being a Ponzi scheme given the complainants raised, the court battles.
If Dande is to live to his word of suing then we can be looking forward to suits on tweets like
Every time the truth about Cytonn’s ill operations are unearthed, the company rushes to hold intensely hyped ‘Open Day’ events and one wonders if all is in place as they claim, why all the panic. #CytonnPonzi— Robert Syundu (@RobertSyundu) August 21, 2018
Panic withdrawals From Cytonn Investment Management LTD. This Issue needs to be properly addressed to avoid Lose of Funds and Employment Opportunities created by that Fund Manager. If its Pandemic Effects Let it be Crystal Clear. KE Financial Sector might Badge itself a Bad Image— Abbot Krober (@Michael_Olili) September 25, 2020
somewhere along the lines, cytonn bribed off journalists, failed to sell any their mediocre overpriced real estate and cooked books #cytonn Cytonn #edwindande #patriciawanjama #shivarora #elizabethnkuku #britam #acorn— pkimani (@pkwazua) September 26, 2020
Haha you people didn't know that Cytonn was a Ponzi Scheme… Now you are crying in the toilet after losing millions.— MUHAMMAD ONYANGO® (@Moha001_Onyango) October 2, 2020
After watching the rise and fall of Tuskys, I feel for Cytonn investors. Those who have invested funds either Cytonn are suffering in silence as the regulator CMA is powerless— Beutah Maroko M. (@BBeutah) December 14, 2020
How it works:— Sura Mbaya (@surambaya) October 2, 2020
-Borrow money to buy and partition a coffee estate
-Present the same land as collateral for the loan
-Use investor deposits and pre-sales to build a massive gate, perimeter fencing and a club house.
-Squander the money
So what's really going on at Cytonn?— Sura Mbaya (@surambaya) October 13, 2020
"When coronavirus hit this year, Cytonn investment invoked Force Majure- Act of God clause, in their contracts saying the pandemic saw their own clients default on Sh1.5 billion in two real estate projects…”https://t.co/DWPZknaORO
Dear Kenyans,— Mwalimu Joshua Njenga (@JKNjenga) September 26, 2020
We warned you about Cytonn, but you called us haters.
If the deal is too good, think twice.https://t.co/04CPis4mbx
Why is clients going on social media bad for responsible investing?Is cytonn acting in our best interests anyway?1.3% of investors will liquidate the pie @CytonnInvest @ehdande @kot pic.twitter.com/O09hd521CN— deevainvest (@deevainvest) June 23, 2020
I won't be surprised if Cytonn Investment turns out to be another big scam. If you invested in Cytonn, be prepared to start crying on TV cameras. pic.twitter.com/alF3VBl7b5— Victor Mochere (@VictorMochere) September 25, 2020
A question that remains key is whether Dande will continue to muzzle those airing their plights, scrutinizing the company or spend more time in office than courts to put his house in order, because it is seems, a lot of cleaning is needed.
And now with the push and pull between investors, regulator and Cytonn, how should we ensure there’s not premium tears and no money is lost in the debacle.
Jaindi Kisero opines.
For me, what I want to hear from both Cytonn Investments and the Capital Markets Authority(CMA) is that member deposits and investments are safe and redeemable immediately on request.
Whether or not the situation we are dealing with presents a case of regulatory overreach is a moot point.
The most pertinent issue the episode raises is the following: what level of protection do investors in money market funds schemes enjoy in this country?
If I were the one making policy and writing the law, I would introduce laws requiring that any private party who makes an invitation and collects the money from the public must be subjected to very high levels of prudential regulation.
I propose higher levels of prudential scrutiny to everybody regardless of whether you are collecting money from the public through a private placements transaction or whether the people you are collection money from are knowledgeable qualified institutional investors with access to lawyers and financial advisers and consultants. Nairobi has too many smooth-talking cowboys.
The first group I will target are those smooth- talking developers who collect deposits from members of the public in the name of the so called off-plan housing projects.
I would introduce stricter standards for transparency and disclosure and insist that any party who makes and invitation to members to invest in his project be made to must disclose audited details on parameters such administrative expenses, how much he has borrowed from the bank for project- and whether the land on which the off-plan project is to be built has been fully paid for.
I would insist that developers must produce and disclose the contracts they have entered into with building contractors.
Most important, I will want to see evidence of existence of mechanisms for protecting members of the public in the case where schemes collapse.
The game is all-too-familiar: A smooth-talking developer approaches you with a title owned by an SPV with an opportunity to purchase a plot in a major property project.
Invariably, the signature development and main attraction will be a golf course surrounded by high-end villas and first-world standard amenities- all built behind high security walls.
The developer proposes to build all other ancillaries: Water supply systems, roads, electricity, swimming pools and a nursery school.
All that you are required to do is pay a deposit, typically, 10 per cent of the value of the plot, and enter into an arrangement committing you to make instalments and complete payments within a year.
Under the arrangement, you are required to build your own high-end villa to an approved design.
Months later, hints of trouble start showing. The title deed is nowhere to be seen, the golf course is not happening, water, electricity and other infrastructure are not being built.
A year later, you get frustrated after you notice that your title deed is not being processed.
Scared, the first thing you do is to withhold monthly instalments. Indeed, the country is littered with too many examples of half-completed property development projects where unsuspecting individuals have paid millions in deposits, but have no title deed many years later.
It begs the question: Whose responsibility is it to tame crooked developers who have collected deposits from unwitting citizens, invested elsewhere and left the projects in deep financial distress?
This is how the model by these crooks run: Borrow money from the bank to partly buy and partition a coffee estate into plots, present the same land as security for the loan, and finally, use the cash flow from the deposits and from the pre-sales you collect from members of the public to build a massive gate, perimeter fencing and a club house.
Because the cowboy has no money of his own to put into the project, he invariably, runs out of cash after a very short time because money is squandered in high administrative expenses such as expensive cars for family and managers –expensive schools for children- and in expensive advertising.
Pressure on the operation start the moment members of the public who deposited money for the plots start smelling trouble, and, especially when they realise that work on the golf course, on the water, electricity and internal roads, is not progressing at all.
The depositors stop payment of instalments for the plots, with dire consequences for the developer.
But the real crunch starts when interest on the money the cowboy developer borrowed to buy the coffee estate kicks in and starts building up.
The unsuspecting individuals who squandered their hard-earned savings paying for plots, which remain un -serviced, are left holding the wrong end of the stick.