Warning to Mirror Trading International members

When Justice Rogers handed down the provisional liquidation order on Mirror Trading International (MTI), it was mainly because of the work of Vaughn Victor.

Victor is an Advocate of the High Court of South Africa who is embroiled in several other cases against scams such as VaultAge Solutions, Bitclub Network, BTC Global, and Thrive International.

At this stage he is acting pro bono in all of these cases, Victor told MyBroadband.

Assisted by Yasin Alli, an attorney from Vezi & De Beer Inc, Victor was able to lodge a successful application for the provisional liquidation order against MTI within the span of five days.

MyBroadband was introduced to Victor through a source. We asked him about the liquidation application and the various liquidators competing for the endorsement of MTI members who have lost their money.

“Our application succeeded because we showed the court that we are serious,” Victor said.

He explained that when he cited the Financial Sector Conduct Authority (FSCA) as the second respondent in their High Court filing, he acted against the advice he received from other advocates who warned him not to over-complicate the application.

By citing the FSCA, Victor said they not only acknowledged the FSCA as important in this matter, they also demonstrated to the court that matter is extremely serious.

Most importantly, in the end, their application succeeded.

Victor said that he began working on it on Saturday 19 December, when MTI first disclosed that Johann Steynberg was missing.

The nights they worked on the legal documents paid off, as they were first to lodge their application with the Western Cape High Court on 23 December.

As they lodged the application on an urgent basis, it was heard on 24 December. However, a group calling themselves the MTI Recovery Action Group (RAG) were opposed to liquidation and asked for the hearing to be delayed.

MTI RAG had withdrawn their objections by the time of the next hearing on 29 December, and the High Court granted the provisional liquidation order against MTI.

Head of investigations and enforcement at the FSCA, Brandon Topham, told MyBroadband that they did not object to the application for provisional liquidation as “it is probably the best course of action to recover money from persons who may have assets of investors and from investors who will need to repay their profits.”

Topham said that anyone who was been “preferred” will also have to repay the money they have extracted from the scheme so that all investors receive fair treatment in the end.

“A curatorship would be another option, but as this is an unlawful business we would prefer not to curate and normally prefer a liquidation route under these circumstances,” stated Topham.

“We will work with liquidators and law enforcement to recover [what we can] but the process will be slow, legally and jurisdictionally complicated, and investors should expect the worst but hope for some recovery at the end of the process.”

Choosing the right liquidator

Victor said that the most important issue now is for the right liquidator to be appointed.

He explained that there will likely be multiple liquidators assigned to the MTI case, but members should still consider carefully which liquidator they choose to nominate.

Victor, together with Vezi & De Beer, have asked MTI members to nominate a company called Investrust, where an attorney called AW van Rooyen handles liquidations.

“We aren’t affiliated with Investrust or Van Rooyen in any way, but they have a proven track record when it comes to dealing with fraudulent business practices,” Victor said.

Specifically, Van Rooyen was appointed the liquidator for QSG Investment Scheme and VaultAge Solutions.

VaultAge Solutions has come up during MyBroadband’s investigations into MTI as the CEO of VaultAge also appeared to be invested as a member of MTI’s exclusive “Founder Pool”.

Victor said that Investrust is the only liquidator he’s worked with that gives constant feedback to creditors.

Most importantly, Van Rooyen has the best interests of the creditors at heart.

“I work only with people that I vet. I can’t jeopardise my name as it’s only me and a colleague of mine that specialise in cybercrime in South Africa,” stated Victor.

“We don’t want another Krion scenario where the only people who win are the liquidators,” Victor said.

Learning from Krion

The “Krion scenario” Victor referred to is the infamous Krion investment scheme which ran from 1998 to 2002.

Krion was declared a Ponzi-type scheme by the High Court of South Africa. Around 14,000 investors and R1.5 billion were involved in the scheme.

Police arrested the mastermind behind Krion, Marietjie Prinsloo, on 23 July 2002 along with her family, who were accused of perpetrating the scheme with her.

While Krion was liquidated on 4 June 2002, it took 11 years before the liquidators filed their first liquidation and distribution account.

The criminal case against Prinsloo and her co-conspirators was only finalised in 2015.

Business Day reported in 2013 that liquidators and other collectors had taken R84 million from the Krion estate over the course of 11 years, while only recovering around R100 million.

After paying the South African Revenue Service and other expenses, less than R10 million remained to repay investors the money they had lost in the scheme.

Citizen reported that liquidators also sued people who had invested in Krion to pay back any money they had received from the scheme, even if they hadn’t actually made a profit.

It provided the example of one investor who had deposited R400,000 into Krion and received R220,000 from the scheme in “profits”. She was sued for the R220,000 even though she had suffered a net loss.

Paying back the money

Victor echoed Topham’s statements, saying that unfortunately in a scheme like MTI people will need to repay the money they withdrew.

This is why it’s essential to appoint a good liquidator that has experience in dealing with fraudulent business practices and understands cryptocurrency.

Some MTI members have raised concerns about the cost of the liquidation, to which Victor said that there is no cause for concern yet.

He explained that there are maximums on how much a liquidator can charge for providing their service:

  • 1% of any money found in a bank account
  • 3% on all immovable assets
  • 10% on all movable assets, including bitcoin

In the unlikely event that the liquidators recover the over 23,000 bitcoin that has flowed through MTI, the liquidator will not be able to keep 10%.

Victor said that the Master of the High Court can determine that a liquidator’s fees are exorbitant and put a cap on it.

The nomination form for Investrust is embedded below. MTI members who wish to nominate Investrust may also visit the insolvency practitioner’s website.

Now read: Criminal case opened against Mirror Trading International

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Warning to Mirror Trading International members