Mirror Trading International (MTI) is going to be used to teach professional Ponzi investors in South Africa a lesson, the head of investigations and enforcement at the Financial Sector Conduct Authority, Brandon Topham, has said.
Speaking to Moneyweb, Topham said that there are people in South Africa who get into Ponzi schemes early, convince other people to join in under their pyramid, and then try and make as much money from the scheme before it inevitably collapses.
“Nobody comes after them,” Topham lamented.
However, with MTI he believes we will see something different.
“I said right from the start to people who would listen that we need to make a good example in South Africa of a Ponzi, because it doesn’t happen in many cases,” said Topham.
“Because this is such a large one, there are going to be people, time, and resources applied to it – and here we can make an example so that the public can actually learn their lesson in this,” he said.
MTI was a scheme that claimed to offer automated forex and later cryptocurrency trading services.
The company and its leadership claimed that MTI had a magical automated trading program – a “bot” powered by artificial intelligence – that could yield growth of 0.5% to 1.5% per day.
Many people warned that the promised returns were too good to be true and that MTI was likely a pyramid scheme, as it rewarded members handsomely to recruit others into their “team”.
The Financial Sector Conduct Authority (FSCA) issued a warning in August last year that people should withdraw their money from the scheme.
In late 2020 the scheme collapsed, as warned, with the MTI leadership blaming the company’s CEO, Johann Steynberg, who allegedly disappeared in December.
A group of members acted quickly and instituted liquidation proceedings against MTI within days of the announcement that Steynberg had gone missing.
The Cape Town High Court granted the provisional liquidation on 29 December 2020.
The provisional liquidators have applied to the court to have their powers extended. Among other things, they are asking for the ability to subpoena people to answer questions in court where necessary.
The provisional liquidation order will be made permanent on 1 March if it remains unopposed.
Pay back the money
One of the object lessons Topham wants the MTI saga to teach is that even if you make money out of a get-rich-quick scheme, when the liquidators come for it, you could still lose everything you invested in it.
“If you’ve been a participant in an unlawful scheme, the liquidators are in a position to claim that money back,” Topham stated. “That is common law in South Africa.”
All MTI investors – even if they didn’t make a profit from MTI – could “in theory” be required to hand over any money they took out, including their original deposit, Topham explained.
“Practically, it obviously costs the liquidators a lot of money and time to go after all the money,” he said.
“So the best bet is for persons to approach the liquidators and try and do an arrangement with them to pay back only the interest, or the unlawful return. There are cases where liquidators can settle with the creditors.”
The many problems with Mirror Trading International
Like many similar cryptocurrency “investment” scams, there were multiple red flags that should have scared investors away from Mirror Trading International.
If its contrived multilevel marketing bonus structure wasn’t enough of a warning, its too-good-to-be-true growth rates should have been.
When something offers consistent growth and promises the equivalent of over 500% interest per annum, it’s not only too good to be true, it also violates the Consumer Protection Act’s prohibition on multiplication schemes.
Another important thing to understand when doing a basic rationality check on MTI’s claims and sustainability is that only 21 million bitcoins will ever be created. To date, around 18.6 million have been mined.
If MTI continued to grow at the rapid rate it was growing, it would eventually have owned every bitcoin in existence (or at least every bitcoin in circulation) in under four years.
Taking the 23,000 bitcoin that was in MTI’s “trading pool” at its height, along with its 0.5% daily growth rate, it is possible to calculate how long it would take for MTI to hit 21 million bitcoin – 3.7 years.
For the sake of simplicity, this calculation assumes MTI members stopped putting more money into the scheme than would be withdrawn after 23,000 bitcoin.
However, as more money gets deposited, or the dubious “AI trading bot” earns more than 0.5% per day, the amount of time it takes to get to 21 million bitcoin decreases. At the rate it claimed to be growing, MTI would have consumed every bitcoin in existence in as little as two years.