Investors called for talks on ailing Cytonn funds 

Cytonn Investments CEO Edwin Dande

Cytonn Investments CEO Edwin Dande addresses journalists at The Stanley Hotel in Nairobi on January 31, 2017.

Photo credit: File | Nation Media Group

What you need to know:

  • Firm had promised handsome returns but failed to pay up once investments matured.
  • Firm alleged that regulatory attacks and bad publicity were the cause of the funds falling into liquidity strain.

Investors in two struggling Cytonn Group investment funds, currently under administration, have been invited for meetings next month to deliberate on the fate of the wealth.

Cytonn High Yields Solutions (CHYS) LLP and Cytonn Real Estate Project Notes LLP(CPN) — were placed under administration by High Court judge Alfred Mabeya in October last year following an application by chief executive Edwin Dande.

The funds' administrator Kereto Marima said the maiden meetings with investors in CHYS and CPN will be held on March 4,  and March 2,  2021, respectively.

“Attendance of this meeting is strictly online. Registration links and the documentation pack for this meeting will be sent to the creditors who have already submitted their proof of claim forms as well as having provided the Administrator with their updated contact form,” he said.

In its application to have the funds placed under administration, Cytonn claimed that it acted following a resolution by the CHYS investors’ board that the investments  funds be put under a special manager instead of liquidating them.

The firm alleged that the economic shocks of Covid-19, regulatory attacks, and bad publicity were the cause of the funds falling into liquidity strain.

“Following the onset of Covid-19, the funds experienced liquidity strains that were further aggravated by negative publicity and sustained regulatory attacks. In the circumstances the board concluded that administration was the best option to provide an enabling environment to restructure the funds and return value to investors,” Cytonn said in a statement.

Liquidity challenges

The asset manager had promised double-digit returns in the unregulated funds, attracting more than 3,500 retail investors. Cytonn’s two troubled funds, CHYS and CPN, were invested in real estate properties.

Matters, however took a turn for the worst after the firm ran into liquidity challenges in its CHYS and CPN, failing to pay investors more than Sh13.5billion upon maturity of their investments.

Several investors sued Cytonn for contract breach and raised issues about the operations of the two funds.
Among the aggrieved investors are three siblings who are seeking to recover Sh46 million they invested with the company.

In the matter that was referred to arbitration, the siblings Charles Nzioki Kanyaa, Harrison Kaloko Kanyaa, and Robert Munyao Kanyaa claim the company breached the investment agreement by failing to pay them their returns. 

When giving out their money, they were promised handsome monthly returns.

They initially invested Sh30 million with the CHYS under the Investment Agreement dated October 29, 2018, at an agreed interest rate of 18 percent payable monthly for 12 months.

The maturity date of the initial investment was November 4, 2019, which said Investment Agreement matured and the CYHS was discharged.