Investors report Cytonn to markets watchdog over Sh122m default
What you need to know:
- The 13 investors claim Cytonn has delayed payments of between Sh500,000 and Sh25 million.
- CMA warns that Cytonn is at risk of defaulting further on investors obligation.
Investors have filed complaints with the Capital Market Authority (CMA) against investment firm Cytonn for failure to pay Sh122.8 million upon maturity of funds in one of its pools.
The 13 investors claim Cytonn has delayed payments of between Sh500,000 and Sh25 million, prompting the regulator to petition the courts in the push to bar Cytonn from putting more cash in real estate projects.
The regulator says it is concerned that one of the funds -- Cytonn High Yield Solutions (CHYS) -- and debt security raised from investors dubbed Cytonn Project Notes pose risks to investing public.
The regulator warns that Cytonn is at risk of defaulting further on investors obligation, which is to pay the securities and interests on maturity.
The revelations are contained in a court papers where CMA wants Cytonn to cut investments of the fund in two of its real estate properties, the Alma and Applewood, citing breach of guidelines.
“The risk of default has started crystallising,” Mr Abubakar Hassan Head Investigation & Enforcement at CMA said in an affidavit.
Cytonn put Sh123 million in the two real estate properties, which is 64 percent of the money pooled by investors for the Cytonn High Yield Fund.
This is in breach of regulatory guidelines that bar pooled fund from investing more than 25 percent in one single entity. Cytonn Investments has however obtained court orders stopping CMA from freezing any further investments in the funds held in SBM bank.
Cytonn chief executive and managing partner Edwin Dande said in court papers that the CMA did not give the company a chance to engage its board to make such a decision that would also affect unit holders.
Mr Dande has accused CMA of engaging in an economic crime, terming the order ‘malicious, unreasonable, irregular and illegal,’ that will fold the high-yield fund he started running in December 2019.
Cytonn said it had pumped Sh96 million into Alma and Applewood and the CMA order may trigger a run on its investment and possible collapse.