MTI collapsed in December of 2020 after it stopped paying out funds to members.
A South African Ponzi scheme has been ordered to pay R32 billion to victims in the US. Mirror Trading International was found to have defrauded at least 23 000 US residents. MTI’s CEO and founder, Johann Steynberg, is still in jail in Brazil where he fled after the scheme collapsed. For more financial news, go to the News24 Business front page.
A South African Ponzi scheme has been ordered to pay $1.7 billion (R32 billion) in restitution to thousands of victims in the US.
A federal judge handed down the restitution order against Mirror Trading International (MTI), a bitcoin trading scheme, last week.
The order described MTI as an “international fraudulent multilevel marketing scheme” that broke a host of US laws.
The ruling was signed by representatives of MTI’s liquidators in South Africa, who have been trying to track down thousands of missing bitcoin for the past two years.
MTI, which was headquartered in Stellenbosch, collapsed in December 2020 after it abruptly halted payments to members.
At the same time, its founder and CEO Johann Steynberg went missing. Steynberg was later tracked down and arrested in Brazil on an Interpol arrest warrant, where he is still awaiting an extradition hearing.
Billion-dollar fines
US authorities started investigating MTI long before its dramatic collapse, with authorities in Texas identifying it as a “multilevel marketing get-rich-quick scheme” as early as July 2020.
In April, a judge ordered Steynberg to pay $1.73 billion (roughly R32 billion) in restitution to defrauded victims and another $1.73 billion as a civil monetary penalty.
This was the highest civil monetary penalty ever ordered in a case involving the Commodity Futures Trading Commission (CFTC).
Last week’s $1.7 billion penalty against MTI, which is separate from the US government’s against Steynberg, brings the CFTC’s enforcement case against MTI to a close.
“The [MTI] fraudsters made the most modern of promises, claiming their ‘Advanced Intelligence Software with Bitcoin as the base currency’ would create untold wealth for investors, but were actually committing a classic form of fraud, a multilevel marketing scam,” said CFTC Director of Enforcement, Ian McGinley.
It is unlikely that US victims of the fraud will see any funds soon, however. The CFTC said it would “not take any action to collect payment for the restitution obligation”, given that MTI’s liquidators filed for bankruptcy proceedings in the US earlier this year.
The bankruptcy case means there is an “automatic stay provision” it place against collecting the funds.
What about South Africa?
MTI is being investigated by the Hawks, although no criminal charges have been brought.
SA prosecutors have also submitted an extradition request to bring Steynberg back to SA in April 2022, but a hearing has yet to take place.
According to Netwerk24, Steynberg has been found guilty by a Brazilian court of using a false passport and is still in jail.
The Western Cape High Court, meanwhile, has ruled that MTI “clearly amounted to an unlawful Ponzi scheme”.
But the most pressing question facing thousands of investors – what happened to their money – remains unanswered.
For the past two years, the group’s liquidators have been searching for billions of rands in missing bitcoin.
They have to date recovered 1 281 bitcoin – which they have already cashed in for just over R1 billion – from FXChoice, an online forex broker which froze MTI’s assets three years ago.
In ongoing proceedings before SA courts, estimates of the number of “missing” bitcoin have ranged from around 3 000 to 10 000. US courts, meanwhile, have accused Steynberg and MTI of stealing over 27 000 bitcoin.
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