Another delay in winding up Rawlins Trust

Cryptocurrency investors face wait after appeal granted over submission that notice may have been signed under duress

Cryptocurrency investors in the ill-fated Rawlins Trust will have to wait a while longer for settlement of the trust’s affairs, after East London high court judge Bantubonke Tokota granted Richard and Marise Rawlins leave to appeal a narrow but significant issue in his winding-up order for the trust.

Tokota accepted submissions on behalf of the couple that their written notice to investor

Russel Linde to the effect that the trust was insolvent, and could not repay his investment, may have been signed and presented under duress, warranting referral to a higher court.

Tokota granted the couple leave to appeal to a full bench of the Eastern Cape high court.

Liquidator Garth Voigt of IDEC Trustees has said in various formal reports to investors up to September 2 that the provisions of the Insolvency Act would “apply as if no appeal has been noted” though no property belonging to the trust could be liquidated without the written consent of the Rawlins trustees.

According to Voigt, the Rawlins

trustees refused permission to transfer funds from a dollardenominated Binance cryptocurrency exchange fund to a local rand-denominated estate bank account to secure a higher interest rate.

The couple reportedly rejected the transfer request on the basis that they did not want to incur the costs of transferring the funds back to the Binance account if they won the appeal and final liquidation was overturned.

Interim dividends could also not be awarded, Voigt said.

Tokota handed down the final order liquidating the trust on June 15, following evidence that up to R120m had been lost of more than R300m invested by hundreds of individuals in the high-risk cryptocurrency market.

By end-august, according to Voigt’s reports, trust funds of $3.19m (about R46.2m at the average exchange rate for the year) in the Binance account, and R58.8m in the estate account, had been secured. Vehicles valued at R1.9m were also held in protective storage.

At the first meeting of creditors in July, 562 claims valued at R204.77m were proved.

Legal proceedings were under way or were expected to recover R47m in misappropriated funds from the trust.

Investors who received “fictitious profits” from the trust would be expected to repay capital and profit to the trust.

The Rawlins trust appeared to run into difficulties in the middle of 2020.

The trigger to the application by Linde that the trust should be sequestrated came when the trustees the Rawlins couple and independent trustee Gary Klinkradt signed an acknowledgment that the trust could not repay the attorney’s R500,000 investment.

This was deemed by Tokota to be an effective notice of insolvency.

But the Rawlins couple claimed they had signed the notice at the end of a round of aggressive intimidation during an August 28 meeting attended by Linde, attorney Angus Pringle, Klinkradt’s partner Jean Erasmus and two unknown men. By that point, the notice had already been signed by Klinkradt.

In finding that the trust must be finally sequestrated, Tokota said there was no legally acceptable evidence the couple was under duress during the meeting.

Duress could not be established merely because someone said they were under duress.

The presence of the unidentified men in the room also did not point to duress.

There was no evidence the

Rawlins couple were subjected to any pressure when they signed the notice.

While he had given reasons for his finding that the notice was not provided under duress, Tokota said in the application for leave to appeal his judgment, that another court may find that the “peculiarity” of the notice being drafted by Linde signalled it was provided by the couple under duress.

Tokota said another court may find in favour of the Rawlins couple.

However, he dismissed other grounds for appeal raised by the couple, as well as an application for leave to appeal a costs order awarded against them earlier.