Court documents filed by liquidators for the failed Mirror Trading International (MTI) crypto scam raise the curtain on one of the most extraordinary investment scams in SA history.

It was ranked as the world’s largest crypto scam in 2020, generating $ 588 million (Rand 7.9 billion) of bitcoin in 470,000 transactions, according to Chainalysis’ Crypto Crime Report 2021.

A data dump by Anonymous ZA puts the number of bitcoins under MTI control at 23,000, worth around R11.5 billion at current prices.

According to the liquidators, around 280,000 investors around the world were involved.

MTI CEO Johann Steynberg disappeared in December 2020 after the company stopped paying withdrawal requests in a bitcoin investment program that promised returns of up to 10% per month. These promises turned out to be just smoke. The company was provisionally liquidated in December 2020.

Lily:

Legal arguments will be heard next week in the Western Cape High Court as to whether MTI will be permanently liquidated or whether, based on an affidavit filed by MTI 50% shareholder Clynton Marks, the liquidation order. provisional should be set aside for a variety of reasons, including that the company’s terms and conditions make it clear that those who invested in the program were club members rather than creditors.

Rather than subjecting MTI to liquidation, some within MTI argue that it should either be placed in corporate reorganization or allowed to reach a compromise with creditors under the Companies Act.

The provisional liquidators argue that it is impossible to save a scheme that is illegal, and they ask the court to declare MTI a Ponzi scheme, and put it into permanent liquidation.

Court documents provide a fascinating and detailed insight into the inner workings of the company.

The rise and fall of MTI

A report by the Financial Sector Conduct Authority (FSCA), included as part of the blocking of the liquidators’ door of a court case, indicates that there were three periods in MTI’s affairs:

1. The first period was a disaster, but it could have been a little disaster if it had ended there. In total, nearly 51 bitcoins were deposited with Belize-based forex broker FXChoice, but 22 or 43% of them were lost by traders. There was no multi-level marketing involved during this stage. It had to come in the second stage.
2. The second period ran from August 2019 to October 2020, when Steynberg reportedly introduced a computerized trading bot that MTI mistakenly claimed to have generated exceptional returns averaging over 10% per month, with only one day losing in about 200. FXChoice reported to the FSCA that 1,846 bitcoins were deposited there between January and June 2020, but of these 566 bitcoins (around 30%) were lost. These business results were completely at odds with the wild claims of success promoted on social media by MTI. FXChoice then froze the remaining 1,280 bitcoins (recently sold by the liquidators for around 1.1 billion rand) placed on deposit with MTI.
3. The third period, and MTI’s last, ran from October to December 2020. Steynberg alleged that all investors’ bitcoins had been transferred from FXChoice to a new broker, Trade 300, supposedly operating out of St. Kitts. in the Caribbean island of Nevis. A total of 16,444 bitcoins would have been transferred in four batches, but when the FSCA investigated it concluded that Trade 300 was a fraudulent creation of Steynberg and does not exist as a bona fide brokerage firm.

All bitcoins from MTI investors are missing or lost

According to the affidavit filed by Principal Liquidator Riaan van Rooyen: “Based on the evidence provided by Steynberg that the 1,282 bitcoins frozen by FXChoice were not part of the bitcoin pool of MTI clients, but were personally owned by MTI and Steynberg, all bitcoins held by MTI for the purpose of trading on behalf of its clients … and the payment of fictitious profits declared and credited in favor of clients to their back office accounts (which were to be paid to an investor when he withdrawn his investment).

No audited accounts

MTI officials had no qualifications for the posts to which they were appointed, according to the liquidators.

Monica Coetzee was appointed by Cheri Marks, Marketing Director of MTI, first as a non-executive director and then as executive director. His experience was as a real estate agent and legal secretary.

His starting salary was R15,000 per month, which was later increased to R40,000, then one bitcoin per month (currently worth around R500,000), which was paid to him by Steynberg via a service provider called Coin Buyers Club.

Based on the evidence provided by the liquidators, MTI was 50-50 owned by Steynberg and Clynton Marks, who would split 10% of the profits between them each Monday.

Steynberg calculated the profits, while the expenses were paid from three loan accounts on behalf of Steynberg, Clynton Marks and JNX Online (one of the Steynberg companies). Records obtained under a subpoena show that MTI owed R7.1 million to JNX Online, Clynton Marks R439 530 and Steynberg R549 529.

“Exclusive control”

Coetzee confirmed during his testimony that Steynberg had sole management control of MTI’s back office system.

The accountant, RDK Accountants, repeatedly requested supporting documents and invoices for payments authorized by Steynberg, but these were never provided. Steynberg was the sole signatory of the MTI bank account.

Every month, Steynberg would transfer enough bitcoin to the Coin Buyers Club to convert them to rand, then pay salaries and other expenses.

Steynberg also appears to have been the only person at MTI dealing with both the broker in Belize and the team of servers in India. He would provide the broker’s trading results to the server team for them to be captured in the back office system.

The MTI accountant (who joined in August 2020) and other executives were pushing for the income to be reported, although this never happened.

MTI’s accounts only reflected expenses, and as a result the company posted a huge loss.

Layers of lies

When Cheri Marks confronted Steynberg about FXChoice’s statement that MTI suffered substantial trading losses and that this did not match the trading statements posted on MTI’s back office, Steynberg told her that FXChoice was lying – because he was upset to lose a big client like MTI and was not happy to be bombarded with requests from clients after the Texas state safety regulator issued a cease and desist order. abstain against MTI.

Evidence from FXChoice shows that MTI (and presumably Steynberg) fabricated trading results by drafting losing demo trades to show positive gains and reporting them as real trades.

Steynberg was able to lie and cheat his way through it, and convince his management team that FXChoice was the one lying out of jealousy.

Steynberg did not consult with MTI management, nor its 50% shareholder Clynton Marks, before allegedly transferring all bitcoin from FXChoice to Trade 300. MTI), ”according to Riaan van Rooyen’s affidavit.

Steynberg explained to management that FXChoice only froze MTI bitcoin, not bitcoin from the MTI member’s trading pool, which included around 10,000 bitcoins in digital wallets, according to the Clynton Marks affidavit.

First red flag internally

The first red flag for Cheri Marks was when the FSCA released a statement on December 17, 2020, in which they confirmed they had found information that Steynberg had created Trade 300.

Steynberg convinced his management team that Trade 300 was an unregulated broker and that this would avoid the risk of funds freezing in the future. The management team accepted this explanation.

“I stop to note that it is clear that Cheri Marks is not (and never was) ready to accept the obvious and uncontroversial reality that Mr. Steynberg directed a fraudulent scheme of gigantic proportions,” Van Rooyen drops off.

The liquidators express their frustration with MTI’s management team and their lack of suspicion and skepticism over the ever-evolving narrative of Steynberg who they say has been treated as a divine figure.

Too big to handle …

The liquidators’ court documents, which include the FSCA report and supporting transcripts from interviews with Steynberg and others involved in the scam, paint a picture of a con artist who was willing to steal it but who had no idea how to end a Ponzi scheme. who had exceeded his wildest dreams.

The developer of the automated trading bot, one Keith Badenhhorst, testified that he was involved in the early development of a trading bot, but had virtually nothing to do with MTI for several years. This contradicts Steynberg’s testimony.

What’s extraordinary about this story is that the FSCA first warned the public in August 2020 to withdraw their money from MTI.

Despite this, the number of investors has grown from around 60,000 to around 280,000, which says a lot about the marketing meaning of the people behind MTI.

They convinced investors that the FSCA, the banks, and the “general public” wanted to shut them down because they had a system that could provide financial freedom to ordinary men and women.

One word explains this extraordinary growth in membership, says Van Rooyen: “Covid. “

Lily: