Investors duped by the Ponzi scheme allegedly run by Barry Tannenbaum were driven by greed, a Johannesburg attorney said on Thursday.

Paul Winer of Werksmans, who represents some of the scheme's victims, said investors had been motivated by the high returns they were promised.

"They were earning what you can't get from any other investment," he said.

Another factor was that once the high calibre of investors in the scheme became known, others were easily persuaded that Tannenbaum's companies were good ones in which to invest.

"If you're told that Mr X, a well-known and respected businessman has invested in the scheme, other potential investors then think it has to be a good investment."

Earlier, the Financial Mail and several other publications reported that Tannenbaum, a South African now supposedly living in Australia, had lured investors to put money into his companies ? Frankel International and Frankel Chemical Corp.

He allegedly promised returns of over 200 percent from what was really a Ponzi scheme.

Recession exposed the scheme

Winer said if "big names" were involved in an investment scheme, others thinking of putting money into the scheme neglected to perform due diligence studies.

Asked what finally exposed the scheme, Winer said the global and then the local recession played a large part.

"What usually happens is if there's a sudden turnaround in the economy, people who have invested money need to withdraw it for other things ... for other obligations," he said.

"So you find that while people are withdrawing money, its hard to attract new investors whose cash has dried up to pay off the old investors."

Winer noted that investors had also become nervous when the Ponzi scheme run by Wall Street veteran Bernard Madoff was exposed.

On the whereabouts of Tannenbaum, Winer said there had been "a lot of speculation".

No certainty over Tannenbaum

He said it wasn't certain whether or not Tannenbaum would return to SA. It wasn't even certain that he was presently in Australia.

Winer said Tannenbaum's companies may have started out as legitimate concerns.

"Many of these Ponzi schemes do ? and then you get private investment and there's expansion and it all takes on a momentum of its own."

The website www.saponzi.co.za describes the Frankel Investment Scheme as operating as an importer and exporter of Active Pharmaceutical Ingredients from foreign countries.

"These ingredients are used by manufacturers of generic medicines and a large part of the API's are used in the manufacturing of the anti-retroviral drug prescribed to people who are exposed to or contracted the HIV/Aids virus."

The site said Tannenbaum promoted his concept to investors "claiming massive returns on investments."

It alleges that he supported his proposition "by showing prospects purchase orders from major pharmaceutical companies such as Adcock Ingram, Aspen and Novartis for the respective API's valued in the many millions."

According to the Financial Mail, victims of the scheme include former Pick n Pay CEO Sean Summers as well as Allan Rock, a professional tennis coach, accountant Howard Lowenthal and broker Wayne Gadden.