SARB Takes Kastelo to Court Over R4bn in Blocked Foreign Exchange Transactions

• The South African Reserve Bank alleged that fintech firm Kastelo misrepresented its business to bypass exchange controls
• SARB investigator André Malherbe claimed Kastelo used clients' foreign investment allowances without proper authorisation
• Kastelo, chaired by DA MP Mark Burke, denied the allegations and said clients signed mandates approving the trading activity

SOUTH AFRICA — The South African Reserve Bank (SARB) is pursuing legal action against fintech company Kastelo over funds frozen at Access Bank, with the central bank alleging that the firm moved approximately R4 billion through foreign exchange transactions in violation of national exchange control regulations.

Business Day reported that in a court affidavit, SARB financial surveillance investigator André Malherbe alleged that Kastelo misrepresented its business model to circumvent exchange controls. Malherbe described the firm's operations as built on conjecture and speculation, and claimed that Kastelo systematically drew on clients' Single Discretionary Allowances (SDA) and Foreign Investment Allowances (FIA) without proper authorisation.

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The investigator further alleged that foreign accounts may have been opened on behalf of clients without their knowledge. Court filings reveal that Kastelo managed a portfolio comprising R891 million in SDAs and R8.9 billion in FIAs, converting those funds into foreign currency for use in cryptocurrency arbitrage trading.

Kastelo pushes back against SARB claims

Kastelo rejected the central bank's characterisation of its conduct. The company, chaired by Democratic Alliance (DA) federal finance chairperson and Member of Parliament Mark Burke and managed by his brother Nicholas Burke, said clients were not kept uninformed. According to Kastelo, customers were provided with explanatory videos and signed mandates explicitly permitting the firm to conduct crypto arbitrage trading on their behalf in exchange for a fee.

The company maintained that its model expanded access to offshore investment returns for ordinary South Africans who would not otherwise have had such opportunities. While crypto arbitrage trading is itself legal in South Africa, Kastelo ceased offering the service after SARB issued an order freezing its accounts.

Mark Burke referred all media enquiries to Kastelo directly, citing his role as a member of parliamentary finance committees. The SARB's broader investigation into the matter remains ongoing. Another DA member who was in the spotlight is Public Works Minister Dean Macpherson after he spent R350,000 on a trip to Brazil.

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DA's multimillion contract raises questions

In a related article, Briefly News reported on the Democratic Alliance's recently disclosed contract with the Dubai-based advisory firm Consulum, raising serious concerns regarding transparency and conflicts of interest. As the political landscape intensifies ahead of the upcoming local government elections, the revelations about this significant financial arrangement could have far-reaching implications for the DA and its integrity in governance.

Source: Briefly News