Daniel Elstein, et al. v. Net 1 UEPS Technologies Inc., et...

Case 1:13-cv-09100-ER Document 1 Filed 12/26/13 of 36

JG RAMOS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

DANIEL ELSTEJN, Individually and On No. 1 3 N UL 0 0 Behalf of All Others Similarly Situated,

Plaintiff,

V.

NET I UEPS TECHNOLOGIES, INC., SERGE CHRISTIAN P. BELAMANT, and HERMAN GIDEON KOTZE,

Defendants.

CLASS ACTION

COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS

DEMAND FOR JURY

Plaintiff Daniel Elstein ("Plaintiff'), individually and on behalf of all other persons

similarly situated, by his undersigned attorneys, for his complaint against defendants, alleges the

following based upon personal knowledge as to himself and his own acts, and information and

belief as to all other matters, based upon, inter aim, the investigation conducted by and through

his attorneys, which included, among other things, a review of the defendants' public documents,

conference calls and announcements made by defendants, United States Securities and Exchange

Commission ("SEC") filings, wire and press releases published by and regarding Net 1 UEPS

Technologies, Inc. ("Net 1" or the "Company"), analysts' reports and advisories about the

Company, and information readily obtainable on the Internet. Plaintiff believes that substantial

evidentiary support will exist for the allegations set forth herein after a reasonable opportunity

for discovery.


NATURE OF THE ACTION

1. This is a federal securities class action on behalf of a class consisting of all

persons other than defendants who purchased or otherwise acquired Net I securities between

August 27, 2009 and November 27, 2013, both dates inclusive (the "Class Period"), seeking to

recover damages caused by defendants' violations of the federal securities laws and to pursue

remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act")

and Rule 10b-5 promulgated thereunder against the Company and certain of its top officials.

2. Net I holds a nonexclusive worldwide license to the Universal Electronic

Payment System ("UEPS"). The Company commercializes the smart card based service through

alliances with banks, card services, and retail organizations.

3. Throughout the Class Period, defendants made materially false and misleading

statements regarding the Company's business, operational and compliance policies. Specifically,

defendants made false and/or misleading statements and/or failed to disclose that: (i) the

Company's practices to secure contracts in South Africa were in violation of the Foreign Corrupt

Practices Act ("FCPA"); and (ii) as a result of the above, the Company's financial statements

were materially false and misleading at all relevant times.

4. On December 4, 2012, the Company disclosed that it was under investigation by

the U.S. Department of Justice, Criminal Division and the Division of the Enforcement of the

Securities and Exchange Commission to determine whether the Company has "violated

provisions of the Foreign Corrupt Practices Act and other U.S. federal criminal laws by engaging

in a scheme to make corrupt payments to officials of the Government of South Africa in

connection with securing a contract with SASSA to provide social welfare and benefits

payments."

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5. On this news, Net 1 stock declined $4.62 per share, or nearly 59%, to close at

$3.22 per share on December 4, 2012.

6. Then, on November 29, 2013, the Company announced that the South African

Constitutional Court ruled that the tender process followed by the SASSA in awarding a contract

to Neti's wholly owned subsidiary Cash Paymaster Services (Proprietary) Limited ("CPS") was

constitutionally invalid.

7. On news of the South African Court's decision, the Company's shares fell $3.34

per share to close at $8.19 per share, a one day decline of over 28%, on unusually high trading

volume.

8. As a result of defendants' wrongful acts and omissions, and the precipitous

decline in the market value of the Company's securities, Plaintiff and other Class members have

suffered significant losses and damages.

JURISDICTION AND VENUE

9. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act (15 U.S.C. § 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17

C.F.R. § 240.10b-5).

10. This Court has jurisdiction over the subject matter of this action pursuant to § 27

of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

11. Venue is proper in this District pursuant to §27 of the Exchange Act, 15 U.S.C.

§78aa and 28 U.S.C. §1391(b), as a significant portion of the defendants' actions, and the

subsequent damages, took place within this District.

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12. In connection with the acts, conduct and other wrongs alleged in this Complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mail, interstate telephone communications and the

facilities of the national securities exchange.

PARTIES

13. Plaintiff, as set forth in the attached Certification, acquired Net I securities at

artificially inflated prices during the Class Period and was damaged upon the revelation of the

alleged corrective disclosures.

14. Defendant Net 1 is a Florida corporation with its principal executive offices

located at Cnr Jan Smuts Avenue, Bolton Road Rosebank, Johannesburg 2196, South Africa.

Net l's common stock trades on the NASDAQ Global Stock Market ("NASDAQ") under the

ticker symbol "UEPS."

15. Defendant Serge Christian P. Belamant ("Belamant"), co-founder of the

Company, was, at all relevant times, the Company's Chairman of the Board of Directors and

Chief Executive Officer.

16. Defendant Herman Gideon Kotze ("Kotze") was, at all relevant times, the

Company's Chief Financial Officer, Treasurer and Secretary.

17. The defendants referenced above in ¶J 15 and 16 are sometimes referred to herein

as the "Individual Defendants,"

SUBSTANTIVE ALLEGATIONS

Background

18, Net 1 is a leading provider of payment solutions and transaction processing

services across multiple industries and in a number of emerging economies. The Company


develops and markets a comprehensive transaction processing solution that encompasses its

smart card-based alternative payment system for the unbanked and under-banked populations of

developing economies and for mobile transaction channels. The Company also provides secure

transaction technology solutions and services, by offering transaction processing, financial and

clinical risk management solutions to various industries. The Company has extensive expertise in

secure online transaction processing, cryptography, mobile telephony and integrated circuit card

(chip/smart card) technologies.

Materially False and Misleading Statements Issued During the Class Period

19. On August 27, 2009, Net I issued a press release announcing its financial and

operating results for the quarter and year ended June 30, 2009. For the quarter, the Company

reported net income of $18.2 million, or $0.33 diluted earnings per share ("EPS") and revenue of

$61.6 million, as compared to net income of $21.5 million, or $0.37 diluted EPS and revenue of

$62.2 million for the same period a year ago. For the year, the Company reported net income of

$86.6 million, or $1.54 diluted EPS and revenue of $246.8 million, as compared to net income of

$86.7 million, or $1.50 diluted EPS and revenue of $254 million for the same period a year ago.

20. On August 27, 2009, the Company filed an annual report for the year ended June

30, 2009 on a Form 10-K with the SEC, which was signed by Defendants Belamant and Kotze,

and reiterated the Company's previously announced quarterly financial results and financial

position. In addition, the Form 10-K contained signed certifications pursuant to the Sarbanes-

Oxley Act of 2002 ("SOX") by Defendants Belamant and Kotze, stating that the financial

information contained in the Form 10-K was accurate and disclosed any material changes to the

Company's internal control over financial reporting.

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21. The 10-K represented the following concerning the CPS and the Company's

compliance with the FCPA:

Our CPS business unit deploys our UEPS - Social Grant Distribution technology to distribute social welfare grants on a monthly basis to 3.5 million beneficiaries in five provinces of South Africa. These social welfare grants are distributed under a contract with SASSA. Our current contract with SASSA expires on March 31, 2010, but may be extended if SASSA has not completed a new tender process prior to expiration. During our 2009, 2008 and 2007 fiscal years, we derived 65%, 67% and 70% of our revenues, respectively, from CPS' social welfare grant distribution business.

We must comply with the Foreign Corrupt Practices Act, or FCPA, which prohibits US companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. In addition, the US Department of Treasury's Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on US foreign policy and national security goals.

22. On November 5, 2009, the Company announced financial and operating results

for the quarter ended September 30, 2009. For the quarter, the Company reported net income of


$26.3 million, or $0.45 diluted EPS and revenue of $67.9 million for the same period a year ago.

23. On November 5, 2009, the Company filed a quarterly report for the period ended

September 30, 2009 on a Form 10-Q with the SEC, which was signed by Defendants Belamant

and Kotze, and reiterated the Company's previously announced quarterly financial results and

financial position. In addition, the Form 10-Q contained signed certifications pursuant to SOX

by Defendants B clamant and Kotzc, stating that the financial information contained in the Form

10-Q was accurate and disclosed any material changes to the Company's internal control over

financial reporting.

M.


24, On February 9, 2010, the Company announced financial and operating results for

the quarter ended December 31, 2009. For the quarter, the Company reported net income of

$193 million, or $0.42 diluted EPS and revenue of $73.8 million, as compared to net income of


25. On February 9, 2010, the Company filed a quarterly report for the period ended

December 31, 2009 on a Form 10-Q with the SEC, which was signed by Defendants Belamant



by Defendants B clamant and Kotze, stating that the financial information contained in the Form



26. On March 31, 2010, the Company announced in a press release a three month

extension of the SASSA contract. The press release stated the following in relevant part:

Net 1 UEPS Technologies, Inc. ("Neti" or the "Company") (NASDAQ: UEPS, JSE: NT1) today announced a three month extension of its contract for the payment of social welfare grants with the South African Social Security Agency ("SASSA"), on the same terms and conditions as the existing agreement, which was scheduled to expire on March 31, 2010. The three month extension allows Neti to maintain its high level of service delivery while the Company and SASSA conclude negotiations. Our ongoing discussions with SASSA include the evaluation of a number of proposals including a further contract extension, a new fixed-term contract and the commencement of a new tender process. Further announcements will be made once discussions have been concluded.

"Although we would have liked to finalize a definitive agreement with SASSA prior to March 31, 2010, this process will provide us a further opportunity to demonstrate the breadth of our technology and various business models to SASSA," said Dr. Serge Belamant, Netl 's Chairman and Chief Executive Officer, "We remain committed to deliver the most efficient and cost-effective solution to SASSA and the most vulnerable citizens of South Africa," he concluded.

VA


27. On May 6, 2010, the Company announced financial and operating results for the

quarter ended March 31, 2010. For the quarter, the Company reported net income of $18.8

million, or $0.41 diluted EPS and revenue of $72.3 million, as compared to net income of $14.4

million, or $0.26 diluted BPS and revenue of $55.9 million for the same period a year ago.

28. On May 6, 2010 the Company filed a quarterly report for the period ended March

31, 2010 on a Form 10-Q with the SEC, which was signed by Defendants Belamant and Kotze,


position. In addition, the Form 10-Q contained signed certifications pursuant to SOX by

Defendants Belamant and Kotze, stating that the financial information contained in the Form 10-

Q was accurate and disclosed any material changes to the Company's internal control over


29. The Form 10-Q represented the following in relevant part:

Our one-year contract with the South African Social Security Agency, or SASSA, for the payment of social welfare grants in the five provinces we serve, was scheduled to expire on March 31, 2010, and was extended for a further three months until June 30, 2010, provisionally under the same terms and conditions. We are currently in discussions with the South African government and expect to conclude such discussions over the next four to six weeks. Following the election of a new president and cabinet, the economic crisis and reduced spending requirements and austerity measures imposed on South African government bodies by the new Minister of Finance, SASSA must reduce the cost of grant administration and distribution and has communicated this requirement to its largest suppliers, including us.

We have tabled a number of proposals to government including further contract extensions, a new fixed-term contract, and the commencement of a new tender process and various permutations of the foregoing. The terms of any agreement reached with SASSA, whether a further contract extension or a new fixed-term contract, may vary significantly from the current contract in terms of pricing, volume and service delivery criteria. Such new terms and conditions may be applied retrospectively to become effective from April 1, 2010 in order to coincide with the commencement of SASSA's fiscal year and the South African National Treasury's budget allocation period. Should we fail to reach any

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agreement with SASSA, our current contract will terminate on June 30, 2010, unless the current contract is further extended. We are and expect to remain an integral supplier to the South African government.

30. On July 1, 2010, in a press release, the Company provided an update on the

SASSA contract. The press release stated the following in relevant part:

Net 1 UEPS Technologies, Inc. ("Neti" or the "Company") (NASDAQ: UEPS, JSE: NTI) today announced that negotiations regarding the current agreement with the South African Social Security Agency ("SASSA") for the payment of social welfare grants which expired on June 30, 2010, have not been finalized and are ongoing. Neti is committed to delivering the highest level of service to the South African government and its citizens, and continues to provide its payment service to SASSA, having commenced payment activities for the July payment cycle. The Company's ongoing discussions with SASSA include the evaluation of a number of proposals, including a further contract extension, a new fixed-term contract and the commencement of a new tender process.

Further announcements will be made when an agreement is reached regarding the terms and conditions of any contract extension. "Our negotiations provide an opportunity to demonstrate the breadth of our technology and various business models to SASSA. However, our ability to accurately predict the timing of any decisions is more challenging given certain factors outside the Company's control" said Dr. Serge Belamant, Nett 's Chairman and Chief Executive Officer. "We remain committed to deliver the most efficient and cost-effective solution to SASSA and the most vulnerable citizens of South Africa," he concluded.

31. On August 26, 2010, Net 1 issued a press release announcing its financial and


reported a net loss of $17 million, or ($0.37) diluted BPS and revenue of $683 million, as

compared to net income of 18.2 million, or $0.33 diluted FPS and revenue of $61.6 million for

the same period a year ago. For the year, the Company reported net income of $39 million, or

$0.84 diluted EPS and revenue of $280.4 million, as compared to net income of $86.6 million, or

$1.53 diluted BPS and revenue of $246.8 million for the same period a year ago.

32. The press release stated the following in relevant part:

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On August 24, 2010, the Company entered into a new service level agreement with the South African Social Security Agency ("SASSA") which replaces its previous SASSA contract that expired on June 30, 2010. The new agreement is retroactively effective from July 1, 2010 and expires on March 31, 2011. Under the new contract, the Company will continue to provide its social welfare grants distribution service to SASSA in five of South Africa's nine provinces. As was the case with the Company's previous contract with SASSA, the new contract contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month. However, the new contract provides for a reduction in both the level of the transaction fee per beneficiary paid and the guaranteed minimum number of beneficiaries. Because the Company continues to derive a substantial percentage of its revenues from the SASSA contract, it expects that the terms of the new contract will materially reduce its revenues, operating income, net income and cash flow for the year ended June 30, 2011.

33, On August 26, 2010, the Company filed an annual report for the year ended June



position. In addition, the Form 10-K contained signed certifications pursuant to SOX by


K was accurate and disclosed any material changes to the Company's internal control over


34. The 10-K represented the following concerning the CPS and FCPA:

Our CPS business unit deploys our UEPS Social Grant Distribution technology to distribute social welfare grants on a monthly basis to roughly 3.2 million beneficiaries in five provinces out of the nine South African provinces. These social welfare grants are distributed on behalf of SASSA, During our 2010, 2009 and 2008 fiscal years, we derived 66%, 65% and 67% of our revenues respectively, from CPS' social welfare grant distribution business. As discussed above, on August 24, 2010, we signed a new service level agreement with SASSA.

We must comply with the FCPA, which prohibits US companies or their agents and employees from providing anything of value to a foreign official for the

10


purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. In addition, OFAC administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on US foreign policy and national security goals.

On August 24, 2010, we entered into a new service level agreement with SASSA which replaces our previous SASSA contract that expired on June 30, 2010. The new agreement is retroactively effective from July 1, 2010 and expires on March 31, 2011. Under the contract, we continue to provide our social welfare grants distribution service to SASSA in five of South Africa's nine provinces (KwaZulu-Natal, Limpopo, North West, Northern Cape and Eastern Cape), As was the ease with our previous contact, the new contract contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month. However, the new contract provides for a reduction in both the level of the transaction fee per beneficiary paid and the guaranteed minimum number of beneficiaries. We expect that our future revenues, operating income, net income and cash flow will be negatively impacted by these reductions unless we are able to offset the reductions by increasing our revenues from our other business activities, reducing expenses, or both.

35. On November 9, 2010, the Company announced financial and operating results

for the quarter ended September 30, 2010. For the quarter, the Company reported net income of






financial position. In addition, the Form lO-Q contained signed certifications pursuant to SOX

by Defendants I3elamant and Kotze, stating that the financial information contained in the Form

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financial reporting,

37. The Form 10-Q stated the following in relevant part:

On August 24, 2010, we entered into a new service level agreement with SAS SA which replaced our previous SAS SA contract that expired on June 30, 2010. The new agreement is retroactively effective from July 1, 2010 and expires on March 31, 2011. Under the contract, we continue to provide our social welfare grants distribution service to SASSA in five of South Africa's nine provinces (KwaZulu-Natal, Limpopo, North West, Northern Cape and Eastern Cape). As was the case with our previous contract, the new contract contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month, However, the new contract provides for a reduction in both the level of the transaction fee per beneficiary paid and the guaranteed minimum number of beneficiaries.

As we previously announced when we signed the new contract, we continue to derive a substantial percentage of our revenues from our SASSA contract, and thus we expect that its terms will materially reduce our revenues, operating income, net income and cash flow for fiscal 2011, unless we are able to offset reduced fees from SASSA by increasing our revenues from our other business activities, reducing expenses, or both.

38, On January 12, 2011, the Company issued a press release announcing a six month

extension on the SASSA contract. The press release stated the following in relevant part:

Net 1 UEPS Technologies, Inc. ("NetI" or the "Company") (NASDAQ: URPS, JSE: NT1) today announced a six month extension of its contract for the payment of social welfare grants with the South African Social Security Agency ("SASSA"), on the same terms and conditions as the existing agreement, which is scheduled to expire on March 31, 2011.

SASSA has indicated that it intends to commence with a new tender process shortly and has requested the six month extension to allow it to conclude the tender process.

39. On February 3, 2011, the Company announced financial and operating results for

the quarter ended December 31, 2010. For the quarter, the Company reported net income of $9.9

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million, or $0.22 diluted EPS and revenue of $89 million, as compared to net income of $19.3

million, or $0.42 diluted EPS and revenue of $73.8 million for the same period a year ago.

40, On February 3, 2011, the Company filed a quarterly report for the period ended

December 31, 2010 on a Form 10-Q with the SEC, which was signed by Defendants l3elamant



by Defendants Belamant and Kotze, stating that the financial information contained in the Form



41. On May 5, 2011, the Company announced financial and operating results for the

quarter ended March 31, 2011. For the quarter, the Company reported a net loss of $21.6 million,

or ($0.47) diluted EPS and revenue of $92.8 million, as compared to net income of $18.8

million, or $0.41 diluted EPS and revenue of $72.3 million for the same period a year ago.

42. On May 5, 2011, the Company filed a quarterly report for the period ended March

31, 2011 on a Form 10-Q with the SEC, which was signed by Defendants Belamant and Kotze,


position. In addition, the Form 10-Q contained signed certifications pursuant to SOX by

Defendants Belarnant and Kotze, stating that the financial information contained in the Form 10-

Q was accurate and disclosed any material changes to the Company's internal control over


43. The Form 10-Q represented the following in relevant part:

Under the Company's SASSA contract, it provides its social welfare grants distribution service to SASSA in five of South Africa's nine provinces (KwaZulu- Natal, Limpopo, North West, Northern Cape and Eastern Cape). The contract

13


contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month. As it has previously disclosed, the Company's SASSA contract has been extended and now runs through September 30, 2011, unless it is further extended. On April 15, 2011, SASSA publicly issued an invitation to bid, inviting service providers to submit proposals for the provision of payment services for social grants in any one or more of the nine provinces of South Africa by May 27, 2011, The Company will participate in the bid process.

44. On August 25, 2011, Net 1 issued a press release announcing its financial and


reported net income of $6.8 million, or $0.15 diluted EPS and revenue of $97.4 million, as

compared to a net loss of $17 million, or ($0.37) diluted BPS and revenue of $68.7 million for

the same period a year ago. For the year, the Company reported net income of $2.6 million, or

$0.06 diluted EPS and revenue of $343.4 million, as compared to net income of $39 million, or

$0.84 diluted EPS and revenue of $280.4 million for the same period a year ago.


30, 2011 on a Form 10-K with the SEC, which was signed by Defendants Belarnant and Kotze,






46. The 10-K represented the following concerning the CPS and FCPA:

Our CPS business unit deploys our UBPS - Social Grant Distribution technology to distribute social welfare grants on a monthly basis to roughly 3.2 million beneficiaries in five of South Africa's nine provinces. These social welfare grants are distributed on behalf of SASSA. During our 2011, 2010 and 2009 fiscal years,

14


we derived 47%, 66% and 65% of our revenues respectively, from CPS' social welfare grant distribution business.

We must comply with the FCPA, which prohibits US companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. In addition, OFAC administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on US foreign policy and national security goals.

Under our SASSA contract, we provide our social welfare grants distribution service to SASSA in five of South Africa's nine provinces (KwaZulu-Natal, Limpopo, North West, Northern Cape and Eastern Cape). The contract contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month.

47. On October 27, 2011, the Company announced financial and operating results for

the quarter ended September 30, 2011. For the quarter, the Company reported net income of



48, On October 27, 2011, the Company filed a quarterly report for the period ended



financial position. In addition, the Form l0-Q contained signed certifications pursuant to SOX

by Defendants B clamant and Kotze, stating that the financial information contained in the Form



49. The Form l0-Q stated the following in relevant part:

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Under our SASSA contract, we provide our social welfare grants distribution service to SASSA in five of South Africa's nine provinces (KwaZulu-Natal, Limpopo, North West, Northern Cape and Eastern Cape). The contract contains a standard pricing formula for all provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month.

In August 2011, we signed a further six-month extension of our contract with SASSA on the same terms and conditions. As a result of the extension, the contract is currently in effect through March 31, 2012. SASSA has advised that the procurement process for the social grants payment tender is still underway and has requested the extension of Netl 's current contract to ensure continuity in service delivery. We are participating in the tender process and have submitted our proposal. The proposals received by SASSA are currently being evaluated. SASSA has asked us, and we have agreed, to extend the validity period of our proposal from October 27, 2011 to March 31, 2012, to allow the various evaluation and adjudication committees to complete their work.

50. On January 18, 2012, the Company announced in a press release that its wholly

owned subsidiary, Cash Payment Services (Pty) Ltd. ("CPS") "has received a Letter of Award

from the South African Social Security Agency ("SASSA") for the provision of payment

services for social grants in all of South Africa's nine provinces for a period of five years." The

press release further stated the following:

"We are overjoyed by the SASSA tender award and very proud of the confidence that SASSA has placed in our company and technology," said Dr. Serge Belamant, Chairman and CEO of Net 1. "Our biometric UEPS/EMV technology has enabled us to provide SASSA with a comprehensive, cost effective solution for the payment of approximately fifteen million monthly grants to ten million recipients in rural and urban areas and we are committed to provide the grant recipients and the South African government with the highest level of service and security. I would like to thank all of our employees and partners for their invaluable contribution towards the tender outcome. This tender award emphasizes the strategic importance of our South African operations and provides further confirmation of our business plan that will afford us, together with our Black Empowerment initiatives that we have been formalizing during the last few years, with the launch pad for our future growth in Africa and other developing economics," he concluded.

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Herman Kotzé, CFO of Net 1, commented: "Given the magnitude of the SASSA tender award, we expect a significant impact on the group's financial affairs when the contract period commences as a result of new volume and pricing, additional costs, capital expenditure and additional contractual obligations. These may have different financial effects in the short-term relative to the long-term benefits to the group. We will be able to provide more detailed guidance regarding the financial effect of this tender award when the service level agreement has been concluded and hope to provide such detail during our next scheduled earnings call on Friday, February 10, 2012."

51. On February 6, 2012, the Company announced in a press release that CPS "has

signed a contract and service level agreement with the South African Social Security Agency

("SASSA") in terms of the award of the national payment tender." The press release further

stated the following:

Under these agreements, CPS will effect payment, on behalf of SASSA, of social grants to all persons who are entitled to receive such grants in all of South Africa's provinces. CPS' primary services include the enrollment of all eligible recipients, issuance of a smart card to each recipient and the biometric validation and payment of social grants to such recipients. The term of the agreements commences on April 1, 2012 and terminates on March 31, 2017.

"Now that the contract and service level agreement with SASSA has been concluded, we look forward to the implementation of our solution," said Dr. Serge 3elamant, Chairman and CEO of Nett. "We are ready and committed to provide SASSA and the grant recipients with the highest level of service and payment security and look forward to the execution of this critical responsibility for the next five years," he concluded.

52. On February 9, 2012, the Company announced financial and operating results for

the quarter ended December 31, 2011. For the quarter, the Company reported net income of

$25.1 million, or $0.56 diluted earnings per share ("BPS") and revenue of $92.1 million, as

compared to net income of $9.9 million, or $0.22 diluted FPS and revenue of $89 million for the

same period a year ago.

53. On February 9, 2012, the Company filed a quarterly report for the period ended

December 31, 2011 on a Form 10-Q with the SEC, which was signed by Defendants Belamant

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financial position. In addition, the Form 10-Q contained signed certifications pursuant to the

Sarbanes-Oxley Act of 2002 ("SOX") by Defendants Belamant and Kotze, stating that the

financial information contained in the Form lO-Q was accurate and disclosed any material

changes to the Company's internal control over financial reporting.

54. The 10-Q represented the following concerning the SASSA contract:

On February 3, 2012, the Company and SASSA entered into a contract for the payment of social grants, together with a related service level agreement pursuant to which it will provide SASSA with its payment service for social grants in all of South Africa's nine provinces.

Under the agreements, the Company will effect payment, on behalf of SASSA, of social grants to all persons who are entitled to receive such grants in all of South Africa's provinces, for a firm price of ZAR 16.44 per beneficiary paid, inclusive of VAT. The Company's primary services include the enrollment of all eligible recipients, issuance of a smart card to each recipient and the biometric validation and payment of social grants to such recipients. The agreements do not provide for a minimum or maximum number of beneficiaries. SASSA is required to fund all grants two working days prior to the date on which the grant payment is to be made by the Company.

The term of the agreements commences on April 1, 2012 and terminates on March 31, 2017. The agreements contain provisions for enrollment of new recipients and transition to the Company's payment service prior to the commencement date for beneficiaries who were previously paid by other service providers.

As we transition into our new contract with SASSA, and provide our distribution service throughout all nine provinces in South Africa, we expect that the percentage of our segment revenues that we will derive from our pension and welfare operations will increase significantly. However, we also expect that as we roll out our distribution service on a national basis, we will incur significant increases in all our operating expenses for additional employees, security, bank charges, vehicle maintenance and fuel, insurance and telecommunications and data transmission. We expect our new contract to be beneficial to us over the contract period despite our current expectation of negative operating margins during the next three quarters due to expansion and new establishment costs to

18


meet the terms of the new contract. We currently expect to be fully phased-in by the second quarter of fiscal 2013.

As we transition into a new service level agreement with SASSA, and provide our distribution service throughout all nine provinces in South Africa, we expect to invest significant amounts of our surplus ZAR- denominated cash balances in capital expenditures over the next 18 months, including for modified payment vehicles, information technology infrastructure and processing equipment and smart cards. We believe that we have sufficient cash reserves and credit facilities to fund these additional capital expenditures. As described above in our discussion of our pension and welfare operations, we also expect to incur significantly higher operating expenses and in the future, We expect to fund these expenses primarily from cash generated from operations under our new contract with SASSA.

55. On May 10, 2012, Net 1 issued a press release announcing its financial and

operating results for the quarter ended March 31, 2012. For the quarter, the Company reported

net income of $7.8 million, or $0.17 diluted EPS and revenue of $90.1 million, as compared to a

net loss of $21.6 million, or ($0.47) diluted EPS and revenue of $92.8 million for the same

period a year ago.

56. On May 10, 2012, the Company filed a quarterly report for the period ended

March 31, 2012 on a Form 10-Q with the SEC, which was signed by Defendants Belamant and

Kotze, and reiterated the Company's previously announced quarterly financial results and



lO-Q was accurate and disclosed any material changes to the Company's internal control over


57. The 10-Q represented the following concerning the SASSA contract:

On January 17, 2012, SASSA awarded us a tender to provide payment services for social grants in all of South Africa's nine provinces for a period of five years. On February 3, 2012, we entered into a new contract, together with a related

19


service level agreement, with SASSA pursuant to which we pay, on behalf of SASSA, social grants to all persons nationally who are entitled to receive such grants, for a firm price of ZAR16.44 per beneficiary paid, or ZAR 14.42 net of VAT. On March 31, 2012, our then-existing contract with SASSA to provide social grant distribution in five provinces expired. We are now operating under the new contract.

We commenced the implementation of our new contract during the third quarter of fiscal 2012. The implementation will be conducted in two phases. The first phase involved issuing approximately 2.5 million MasterCard-branded debit cards to beneficiaries that we did not serve under our previous contract in order to establish the payment process to pay all social grants in the country. We successfully commenced the national grant payment process for approximately 9.2 million beneficiaries on April 2, 2012.

The second phase will require us to re-enroll all social grant beneficiaries in South Africa. This enrollment process will require us to capture the personal and biometric information of each beneficiary and issue each grant recipient with our latest MasterCard-branded EMV/UEPS combination smart cards. These smart cards can be used across all elements of the South African National Payment System, including at ATMs and POS's, in addition to our current UEPS merchant acquiring system and mobile pay points. We expect to commence the second phase of the enrollment process in June 2012 and plan to be substantially complete by March 2013.

Following the conclusion of the new service level agreement, we paid certain of our executives and key employees special bonuses of $5.4 million (ZAR 41.8 million) in recognition of their contributions to the compilation of the successful SASSA tender, the development of the new technologies and the support provided for the implementation of the tender award, In order to complete the first phase of the implementation on time, we hired approximately 2,200 of the estimated 2,600 temporary employees required to assist with the first phase of the beneficiary enrollment process. Once we have completed the second phase, we expect our permanent employee base to increase from pre-new contract levels by approximately 900 people.

58. On August 23, 2012, Net I issued a press release announcing its financial and


reported a net loss of $8 million, or ($0.17) diluted BPS and revenue of $107.6 million, as

compared to net income of $6.9 million, or $0.15 diluted EPS and revenue of $97.4 million for

20


the same period a year ago. For the year, the Company reported net income of $44.7 million, or

$0.99 diluted EPS and revenue of $390.3 million, as compared to net income of $2.5 million, or

$0.06 diluted EPS and revenue of $343.4 million for the same period a year ago.








60. The 10-K represented the following concerning the SAS SA contract:

On January 17, 2012, SASSA awarded us a tender to provide payment services for social grants in all of South Africa's nine provinces for a period of five years. On February 3, 2012, we entered into a new contract, together with a related service level agreement, with SASSA pursuant to which we pay, on behalf of SASSA, social grants to all persons nationally who are entitled to receive such grants, for a firm price of ZAR16.44 per beneficiary paid, or ZAR 14.42 net of VAT. The new pricing terms became effective on April 1, 2012, upon the March 31, 2012 expiration of our then-existing contract with SASSA to provide social grant distribution in five provinces. Thus, our fiscal 2012 results of operations include three quarters of operations under the prior contract, which contained a standard pricing formula for all five provinces based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month.

We commenced the implementation of our new contract during the third quarter of fiscal 2012. The implementation is being conducted in two phases. The first phase involved issuing approximately 2.5 million MasterCard-branded debit cards to beneficiaries that we did not serve under our previous contract in order to establish the payment process to pay all social grants in the country. We commenced the national grant payment process for approximately 9.2 million beneficiaries on April 2, 2012 and thus successfully completed the first phase of implementation.

21


The second phase requires us to re-enroll all social grant beneficiaries in South Africa. This enrollment process will require us to capture the personal and biometric information of each beneficiary and issue each grant recipient with our latest MasterCard-branded UEPS/EMV combination smart cards. These smart cards can be used across all elements of the South African National Payment System, including at ATMs and POSs, in addition to our current UBPS merchant acquiring system and mobile pay points. We commenced the second phase of the enrollment process in early July 2012 and plan to be substantially complete by March 2013.

In order to complete the first phase of the implementation on time, we hired approximately 2,500 temporary employees required to assist with the first phase of the beneficiary enrollment process. Once we have completed the second phase, we expect our permanent employee base to increase from pre-new contract levels by approximately 900 people. Additionally, following the conclusion of the new service level agreement, we paid certain of our executives and key employees special bonuses of $5.4 million (ZAR 41.8 million) in recognition of their contributions to the compilation of the successful SAS SA tender, the development of the new technologies and the support provided for the implementation of the tender award.

During fiscal 2012 we incurred direct implementation expenses (excluding the bonuses discussed above) of approximately $10.9 million (ZAR 83.9 million) including staff, travel, premises hire for enrollment, stationery, delivery and advertising costs. We are unable to quantify the value of time spent by our executives and pension and welfare operations managers and staff that service the five provinces in which we operated under the previous contract and that have assisted in the implementation of the national award. We also incurred approximately $21.2 million in capital expenditures, primarily to acquire registration workstations, payment vehicles and the branch infrastructure required for the national implementation. We anticipate cumulative capital expenditures related to the ramp of our national contract to be in the $45 to $50 million range, of which roughly two-thirds should be incurred by the end of the second quarter of fiscal 2013.

Impact of new SASSA contract: Our new SAS SA contract has resulted in higher revenues from SASSA during the fourth quarter of fiscal 2012. We commenced implementing the new contract during the third quarter of fiscal 2012 and incurred additional implementation and staff costs of approximately $10.9 million, excluding cash bonuses of $5.4 million which were paid as a result of the tender award to us.

22


61. On November 8, 2012, Net 1 issued a press release announcing its financial and

operating results for the quarter ended September 30, 2012. For the quarter, the Company

reported net income of $6.7 million, or $0.15 diluted EPS and revenue of $111.7 million, as

compared to net income of $19.8 million, or $0.44 diluted EPS and revenue of $99.9 million for

the same period a year ago.


September 30, 2012 on a Form lO-Q with the SEC, which was signed by Defendants Belamant






63. The l0Q represented the following concerning the SAS SA contract:

We commenced the second phase of the enrollment process in early July 2012 and plan to be substantially complete by March 2013, in accordance with the enrollment plan agreed with SASSA. Under our agreement with SASSA, we have to enroll both the grant recipients (those individuals who receive the actual payment and are issued with our UEPS/EMV smart card), as well as the grant beneficiaries (those individuals who have qualified for the social grant, but are not necessarily the recipient of the grant). By way of example, a parent who has three children and receives a grant for all three children is the grant recipient, while the three children are each classified individually as grant beneficiaries. In this case, we capture the personal and biometric information of the parent and three children, but only the parent is issued with an UEPS/EMV smart card. While the number of grant recipients on a national basis has consistently been quantified by SASSA at 9.4 million individuals, the number of beneficiaries is continually being revised by SASSA on an ongoing basis from an initial estimate of approximately 15.5 million, to the current estimate of approximately 21.6 million. As of September 30, 2012, we had enrolled approximately 1.7 million grant recipients and 1.3 million beneficiaries associated with these recipients in accordance with our second phase enrollment schedule, and issued them our UEPS/EMV smart card. In order to complete the second phase of the

23


implementation on time, and given the significantly higher number of beneficiaries, we increased the number of temporary employees from 2,500 to 5,500. The total number of temporary employees we have hired is significantly more than the 2,500 we previously expected as the actual number of individuals (grant recipients plus grant beneficiaries) that SAS SA has asked us to enroll has increased substantially and is currently estimated at 21.6 million, which is approximately 40% higher than the number originally anticipated. Once we have completed the enrollment process, we expect to retain between 1,200 and 1,500 of these temporary employees on a permanent basis. We do not receive additional compensation for the enrollment of grant beneficiaries who are not otherwise grant recipients because the pricing under our SASSA contract is based on the number of grant recipients we pay, rather than the number of grant beneficiaries.

64. The statements referenced in IT 19-63 above were materially false and/or

misleading because they misrepresented and failed to disclose the following adverse facts, which

were known to defendants or recklessly disregarded by them, including that: (i) the Company's

practices to secure contracts in South Africa were in violation of the Foreign Corrupt Practices

Act ("FCPA"); and (ii) as a result of the above, the Company's financial statements were

materially false and misleading at all relevant times.

THE TRUTH BEGINS TO EMERGE

65. On December 4, 2012, the Company filed a Form 8-K with the SEC disclosing

the following in relevant part

On November 30, 2012, we received a letter from the U.S. Department of Justice, Criminal Division (the "DOJ") informing us that the DOJ and the Federal Bureau of Investigation have begun an investigation into whether Net 1 UEPS Technologies, Inc. and its subsidiaries, including their officers, directors, employees, and agents (collectively, "Net 1") and other persons and entities possibly affiliated with Net 1 violated provisions of the Foreign Corrupt Practices Act and other U.S. federal criminal laws by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with securing a contract with the South African Social Security Agency to provide social welfare and benefits payments and also engaged in violations of the federal securities laws in connection with statements made by Net 1 in its SEC filings regarding this contract. On the same date, we received a letter from the Division of Enforcement of the Securities and Exchange Commission (the "SEC") advising

24


us that it is also conducting an investigation concerning our company. The SEC letter states that the investigation is a non-public, fact-finding inquiry.

66. On this news, Net I shares declined $462 per share, or nearly 59%, to close at

$3.22 per share on December 4, 2012.

67. Then, on November 29, 2013, the Constitutional Court, the highest court in South

Africa for matters involving constitutional interpretation, dealt a near fatal blow to Net l's hopes

to reinstate the SASSA contract, by ruling that the tender process followed by the SASSA in

awarding a contract to Neti's wholly owned subsidiary CPS was constitutionally invalid.

68. On news of the South African court's decision the Company's shares fell $3.34

per share to close at $8.19 per share, a one day decline of over 28%, on unusually high volume.

PLAINTIFF'S CLASS ACTION ALLEGATIONS

69. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or

otherwise acquired Net I securities during the Class Period (the "Class"); and were damaged

upon the revelation of the alleged corrective disclosures. Excluded from the Class are

defendants herein, the officers and directors of the Company, at all relevant times, members of

their immediate families and their legal representatives, heirs, successors or assigns and any

entity in which defendants have or had a controlling interest.

70. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Net 1 securities were actively traded on the

NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and

can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds

or thousands of members in the proposed Class. Record owners and other members of the Class

25


may be identified from records maintained by Net I or its transfer agent and may be notified of

the pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions.

71. Plaintiff's claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of

federal law that is complained of herein.

72. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

Plaintiff has no interests antagonistic to or in conflict with those of the Class.

73. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

• whether the federal securities laws were violated by defendants' acts as alleged herein;

• whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Net 1;

• whether the Individual Defendants caused Net 1 to issue false and misleading financial statements during the Class Period;

• whether defendants acted knowingly or recklessly in issuing false and misleading financial statements;

• whether the prices of Net 1 securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and

• whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

26


74. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

75. Plaintiff will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:

• defendants made public misrepresentations or failed to disclose material facts during the Class Period;

s the omissions and misrepresentations were material;

s Net I securities are traded in an efficient market;

• the Company's shares were liquid and traded with moderate to heavy volume during the Class Period;

• the Company traded on the NASDAQ and was covered by multiple analysts;

• the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and

• Plaintiff and members of the Class purchased, acquired and/or sold Net 1 securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.

76. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a

presumption of reliance upon the integrity of the market.

27


COUNT I

(Against All Defendants For Violations of Section 10(b) And Rule 10b-5 Promulgated Thereunder)

77. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

78. This Count is asserted against defendants and is based upon Section 10(b) of the

Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.

79. During the Class Period, defendants engaged in a plan, scheme, conspiracy and

course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions,

practices and courses of business which operated as a fraud and deceit upon Plaintiff and the

other members of the Class; made various untrue statements of material facts and omitted to state

material facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading; and employed devices, schemes and artifices to

defraud in connection with the purchase and sale of securities. Such scheme was intended to,

and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and

other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of

Net 1 securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise

acquire Net 1 securities and options at artificially inflated prices. In furtherance of this unlawful

scheme, plan and course of conduct, defendants, and each of them, took the actions set forth

herein.

80. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the

defendants participated directly or indirectly in the preparation and/or issuance of the quarterly

and annual reports, SEC filings, press releases and other statements and documents described

OT


above, including statements made to securities analysts and the media that were designed to

influence the market for Net 1 securities. Such reports, filings, releases and statements were

materially false and misleading in that they failed to disclose material adverse information and

misrepresented the truth about Net l's finances and business prospects.

81. By virtue of their positions at Net 1, defendants had actual knowledge of the

materially false and misleading statements and material omissions alleged herein and intended

thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, defendants

acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose

such facts as would reveal the materially false and misleading nature of the statements made,

although such facts were readily available to defendants. Said acts and omissions of defendants

were committed willfully or with reckless disregard for the truth. In addition, each defendant

knew or recklessly disregarded that material facts were being misrepresented or omitted as

described above.

82. Defendants were personally motivated to make false statements and omit material

information necessary to make the statements not misleading in order to personally benefit from

the sale of Net 1 securities from their personal portfolios.

83. Information showing that defendants acted knowingly or with reckless disregard

for the truth is peculiarly within defendants' knowledge and control. As the senior managers

and/or directors of Net 1, the Individual Defendants had knowledge of the details of Net l's

internal affairs.

84. The Individual Defendants are liable both directly and indirectly for the wrongs

complained of herein. Because of their positions of control and authority, the Individual

Defendants were able to and did, directly or indirectly, control the content of the statements of

29


Net 1. As officers and/or directors of a publicly-held company, the Individual Defendants had a

duty to disseminate timely, accurate, and truthful information with respect to Net I's businesses,

operations, future financial condition and future prospects. As a result of the dissemination of

the aforementioned false and misleading reports, releases and public statements, the market price

of Net 1 securities was artificially inflated throughout the Class Period. In ignorance of the

adverse facts concerning Net l's business and financial condition which were concealed by

defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Net 1

securities at artificially inflated prices and relied upon the price of the securities, the integrity of

the market for the securities and/or upon statements disseminated by defendants, and were

damaged thereby.

85. During the Class Period, Net 1 securities were traded on an active and efficient

market. Plaintiff and the other members of the Class, relying on the materially false and

misleading statements described herein, which the defendants made, issued or caused to be

disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares

of Net 1 securities at prices artificially inflated by defendants' wrongful conduct. Had Plaintiff

and the other members of the Class known the truth, they would not have purchased or otherwise

acquired said securities, or would not have purchased or otherwise acquired them at the inflated

prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff and the Class,

the true value of Net 1 securities was substantially lower than the prices paid by Plaintiff and the

other members of the Class. The market price of Net 1 securities declined sharply upon public

disclosure of the facts alleged herein to the injury of Plaintiff and Class members.

30


86. By reason of the conduct alleged herein, defendants knowingly or recklessly,

directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5

promulgated thereunder.

87. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their respective purchases,

acquisitions and sales of the Company's securities during the Class Period, upon the disclosure

that the Company had been disseminating misrepresented financial statements to the investing

public.

COUNT II

(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants)

88. Plaintiff repeats and realleges each and every allegation contained in the

foregoing paragraphs as if fully set forth herein.

89. During the Class Period, the Individual Defendants participated in the operation

and management of Net 1, and conducted and participated, directly and indirectly, in the conduct

of Net l's business affairs. Because of their senior positions, they knew the adverse non-public

information about Net l's misstatement of income and expenses and false financial statements.

90. As officers and/or directors of a publicly owned company, the Individual

Defendants had a duty to disseminate accurate and truthful information with respect to Net I's

financial condition and results of operations, and to correct promptly any public statements

issued by Net 1 which had become materially false or misleading.

91. Because of their positions of control and authority as senior officers, the

Individual Defendants were able to, and did, control the contents of the various reports, press

31


releases and public filings which Net I disseminated in the marketplace during the Class Period

concerning Net l's results of operations. Throughout the Class Period, the Individual

Defendants exercised their power and authority to cause Net 1 to engage in the wrongful acts

complained of herein. The Individual Defendants therefore, were "controlling persons" of Net 1

within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in

the unlawful conduct alleged which artificially inflated the market price of Net 1 securities.

92. Each of the Individual Defendants, therefore, acted as a controlling person of Net

1. By reason of their senior management positions and/or being directors of Net 1, each of the

Individual Defendants had the power to direct the actions of and exercised the same to cause,

Net 1 to engage in the unlawful acts and conduct complained of herein, Each of the Individual

Defendants exercised control over the general operations of Net 1 and possessed the power to

control the specific activities which comprise the primary violations about which Plaintiff and

the other members of the Class complain.

93. By reason of the above conduct, the Individual Defendants are liable pursuant to

Section 20(a) of the Exchange Act for the violations committed by Net 1.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff demands judgment against defendants as follows:

A. Determining that the instant action may be maintained as a class action under

Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class

representative;

32


B. Requiring defendants to pay damages sustained by Plaintiff and the Class by

reason of the acts and transactions alleged herein;

C. Awarding Plaintiff and the other members of the Class prejudgment and post-

judgment interest, as well as their reasonable attorneys fees, expert fees and other costs; and

D. Awarding such other and further relief as this Court may deem just and proper.

DEMAND FOR TRIAL BY JURY

Plaintiff hereby demands a trial by jury.

Dated: December 24, 2013 Respectfully submitted,

POME TZ GROSSMAN HUFFORD DA ROM & GROSS LLP

Jere m/ 1 . Lieberman Les1Øy. Portnoy

U

600(J'fiird Avenue, 20th Floor New York, New York 10016 Telephone: (212) 661-1 100 Facsimile: (212) 661-8665

POMERANTZ GROSSMAN HUFFORD DAHLSTROM & GROSS LLP

Patrick V. Dahlstrom Ten South LaSalle Street, Suite 3505 Chicago, Illinois 60603 Telephone: (312) 377-1181 Facsimile: (312) 377-1184

Attorneys for Plaintjff

33


CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS

i. i, i ,make this declaration pursuant to Section 27(a)(2) of

the Securities Act of 1933 ("Securities Act") and/or Section 21D(a)(2) of the Securities Exchange Act of 1934

("Exchange Act") as amended by the Private Securities Litigation Reform Act of 1995.

2, I have reviewed a Complaint against Net I UBPS Technologies Inc. ("Net 1" or the "Company")

and, authorize the filing of a motion on my behalf for appointment as lead plaintiff.

3. [did not purchase or acquire Net 1 securities at the direction of plaintiffs counsel or in order to

participate in any private action arising under the Securities Act or Exchange Act.

4. lam willing to serve as a representative party on behalf of a Class of Investors who purchased or

acquired Net 1 securities during the class period, including providing testimony at deposition and trial, if

necessary. J understand that the Court has the authority to select the most adequate lead plaintiff in this action.

5. To the best of my current knowledge, the attached sheet lists all of my transactions in Net 1

securities during the Class Period as specified in the Complaint.

6, During the three-year period preceding the date on which this Certification is signed, I have not

sought to serve as a representative party on behalf of a class under the federal securities laws.

7. I agree not to accept any payment for serving as a representative party on behalf of the class asset

forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable costs and expenses

directly relating to the representation of the class as ordered or approved by the Court.


8. I declare under penalty of perjury that the foregoing is true and correct.

Executed I (Date)

(fLJ4~~ (S ignature)

1>m) E71 (Type or Print Name)


Date 7/26/2007 Purchase

4/1/2008 Purchase 6/27/2008 Purchase

8/25/2008 Purchase

9/24/2008 Purchase 10/9/2008 Purchase

10/10/2008 Purchase

4/5/2010 Purchase

Number 500

2000

3000

1500

6000 5000

2000

3000

23000

Cost

$ 11,907.50 $ 45,029.95

$ 76,556.74

$ 35,547,75 $ 140,898.83

$ 95,845.53

$ 28,220.75

$ 50,170.42 $ 484,177.47

Price/share $ 23,82

$ 22.51

$ 25.52 $ 23,70

$ 23,48

$ 19.17 $ 14.11

$ 16.72

Daniel Elstein, et al. v. Net 1 UEPS Technologies Inc., et...

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