Investigation Reveals How 54 Collective Fraudulently Withdrew Sh595M from Mastercard Foundation

A damning forensic audit has exposed how venture capital firm 54 Collective systematically misappropriated $4.6 million (Sh595 million) from Mastercard Foundation through fraudulent accounting practices and unauthorized expenditure, leading to a bitter legal battle that has seen the startup incubator forced into liquidation.

The scandal began unraveling in August 2024 when Founders Factory Africa (FFA) rebranded to 54 Collective without approval from Mastercard Foundation, which had provided grant funding worth $106.5 million over three years. The unauthorized rebrand alone cost nearly $700,000, raising immediate red flags about financial oversight.

Court documents filed in South Africa’s High Court reveal that the conflict deepened when Mastercard Foundation discovered serious governance issues. The three directors running the non-profit organization were simultaneously operating Utopia Capital, a for-profit affiliate, creating clear conflicts of interest that violated grant conditions.

The most damaging revelations emerged from a Deloitte forensic audit commissioned in December 2024. Investigators uncovered over 2,000 back-dated accounting entries designed to obscure the movement of funds. These manipulated records made it nearly impossible to trace where grant money had actually been spent, suggesting deliberate attempts to hide financial misconduct.

The audit exposed how $4.6 million was transferred from the non-profit to for-profit affiliates in separate tranches, directly violating the grant’s charitable purpose requirements. When confronted, 54 Collective’s leadership claimed the transfers were part of “aligned operations,” despite the obvious conflict of interest.

PricewaterhouseCoopers, the organization’s auditor, attributed the financial irregularities to inadequate adoption of international reporting standards and poor financial competency within the organization. Notably, 54 Collective failed to produce audited financial statements for both 2023 and 2024, submitting only draft statements for 2023.

Mastercard Foundation issued a 90-day termination notice in January 2025, demanding the return of unspent grant funds. Instead of complying, 54 Collective entered business rescue proceedings – South Africa’s equivalent of bankruptcy protection – in what appeared to be a desperate attempt to retain the money.

The South African High Court saw through this maneuver, ruling the business rescue application a “sham” and declaring it illegal. The court found that 54 Collective was using bankruptcy protection as a tactic to withhold grant funds from the Foundation.

Even the wind-down process raised suspicions. 54 Collective set aside $3.2 million from the grant to cover severance pay and operational costs, but investigators could not account for at least $1 million of these expenditures.

The legal saga has had devastating consequences for 54 Collective’s African operations. The organization, which supported Kenyan startups including packaging solutions provider Wingi, buy-now-pay-later platform Zanifu, and digital health platform Zuri Health, announced it was winding down operations and cutting jobs across the continent.

Mastercard Foundation has since filed for urgent asset freezing and official liquidation of 54 Collective. The organization has not contested the provisional liquidation ruling, with leadership citing insolvency rather than admitting to intentional fraud.

The final court hearing is scheduled for August 11, which will determine whether the liquidation becomes permanent. If upheld, creditors including Mastercard Foundation will attempt to recover remaining assets from what was once a prominent player in Africa’s startup ecosystem.

This case highlights the critical importance of financial governance in grant-funded organizations and serves as a cautionary tale about the risks of conflicts of interest in the venture capital space. The scandal has not only damaged 54 Collective’s reputation but also raised questions about oversight mechanisms for large-scale philanthropic funding in Africa’s startup sector.