The Civil Division of the High Court has ordered Smart Protus Magara to refund more than USD 135,000 (about Shillings 500 million) to two Tanzanian nationals after finding him personally liable for money they lost in the collapsed D9 Investment Club Ponzi scheme.
In a judgment delivered by Justice Bernard Namanya, the court found that Magara had failed to account for funds deposited into his personal Equity Bank account by Goodluck Francis Kway and George Kessy, despite claiming the money had been used to purchase electronic currency known as E-money.
The dispute stems from investments made in the now-defunct D9 Investment Club, an online Ponzi scheme that collapsed after attracting hundreds of investors in Uganda and other countries with promises of unusually high returns.
According to court records, Kway and Kessy met Magara in Kampala, where he introduced them to the scheme and represented that investors would earn returns of USD 400 for every USD 1,000 invested. Acting on those representations, Kway deposited USD 58,098, while Kessy deposited USD 79,945, bringing the total amount paid into Magara’s account to USD 138,043.
The two investors told the court that they neither received the promised returns nor recovered their principal investment. They added that despite repeated demands and a formal notice of intention to sue, Magara failed to refund the money, prompting them to file the case.
In his defence, Magara denied being the owner or promoter of D9 Investment Club, describing himself as an ordinary member of an online platform registered outside Uganda. He argued that participation in the platform was voluntary and that the money deposited into his account was payment for E-money rather than an investment entrusted to him.
Magara further maintained that he transferred the E-money to the plaintiffs’ online accounts and that the collapse of the D9 platform in 2017 was beyond his control, adding that he also suffered financial losses when the scheme failed.
However, Justice Namanya found that explanation unsupported by evidence. The court noted that Magara failed to produce transaction records from the D9 platform, account statements showing corresponding E-money transfers, or any documentation demonstrating that the plaintiffs had received value for the money they deposited.
The judge also rejected Magara’s reliance on the Official Receiver process that followed the collapse of D9, observing that there was no evidence the two Tanzanian investors had been verified or compensated under that process.
Justice Namanya concluded that the plaintiffs had proved, on a balance of probabilities, that they deposited USD 135,016 into Magara’s personal bank account and that he failed to account for, refund or otherwise apply the money for their benefit. The court therefore held him personally liable to refund the amount.
In addition to the principal sum, the court ordered Magara to pay 20 per cent annual interest on the money from 2022 until payment in full, as well as the costs of the suit.
The D9 Investment Club was among several Ponzi schemes that left thousands of investors across Uganda and the region counting heavy losses after promising exceptionally high returns before eventually collapsing.
Such schemes typically attract investors by paying early participants unusually high profits using money contributed by new members, before shutting down once deposits can no longer sustain the payouts-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
