The Financial Sector Conduct Authority (FSCA) has finalised its investigation into Mirror Trading International (MTI) and found it was a scam without any trading as promised to investors.
MTI was started in 2019 and promised investors spectacular returns made possible by a trading bot powered by artificial intelligence.
From the outset, many people warned that this cryptocurrency scheme was not legitimate and that many people will lose money through it.
The FSCA also issued a warning in August 2020 that people should withdraw their money from the scheme immediately.
Prior to that, the Texas State Securities Board issued an emergency cease-and-desist order against MTI and accused it of perpetrating fraud through an illegal international multilevel marketing programme.
Canada’s Autorité des Marchés Financiers (AMF) also placed MTI on its list of illegal online platforms, issuing a warning that MTI illegally solicits investors.
Despite these warnings, MTI continued to grow, with an estimated 280,000 members depositing around 23,000 Bitcoin in the scheme.
This was until MTI collapsed in late 2020 after members could not withdraw funds from the scheme and its CEO, Johann Steynberg disappeared.
Some MTI members instituted liquidation proceedings against MTI within days of the announcement that Steynberg had gone missing, and the Cape Town High Court granted a provisional liquidation on 29 December 2020.
The Master of the High Court appointed AW van Rooyen (Investrust Insolvency Practitioners), H Bester (Tygerberg Trustees), J Barnard and D Basson (Tshwane Trust Co) as liquidators.
Speaking to Moneyweb, The FSCA’s head of investigations, Gerhard van Deventer said it was an intensive six-month investigation in which they invested a lot of resources.
He said they are now completely convinced that MTI was a scam and that there is no evidence of trading by an AI bot as it was sold to investors.
What is particularly relevant to the FSCA is that Mirror Trading International conducted unregistered business.
The FSCA said it will share its report with the liquidators to assist with their investigation and the liquidation process.
It will also continue with the second phase of its action, which include enforcement actions which include administrative fines.
What happens next?
The bad news for anyone who benefitted from MTI is that they may have to pay back the money as part of the liquidation process.
The FSCA said the liquidators are of the view that the funds or assets received by certain members of the public pursuant to investing with MTI, may be unlawful.
The liquidators intend to recover such funds and assets from these investors – a course of action that the FSCA supports. Affected investors are requested to contact the liquidators in this regard.
Anyone who intends to lodge a claim with the liquidators, or who has information that can be of assistance, is urged to contact the liquidators through their websites.
The websites, listed below, will also be used to communicate information to the public.
Claim forms will be available on these websites within the next few days.
Although the main FSCA investigation has been completed, it has opened a criminal case with the Commercial Crime Unit and will assist the NPA with its responsibilities.
It will also assist the liquidators in their extensive task of completing the liquidation and subsequent distributions.
The FSCA is also working with foreign regulators to ensure that MTI’s unlawful activities are not perpetuated in other jurisdictions.
The FSCA will now consider administrative actions to be taken against the individuals and entities involved in the matter.
Van Deventer said experience has shown that the chance of a positive outcome for investors is very low.
He said they are sometimes lucky by recovering money from bank accounts, but the fact that MTI used Bitcoin makes this unlikely.
He added that they want to use this case as a warning to people to stay away from pyramid schemes.