FXChoice, the broker originally used by defunct get-rich-quick scheme Mirror Trading International, has transferred around 1,200 bitcoin that laid frozen in an account since June 2020.
The funds were transferred to a liquidator in South Africa at the authorisation of the Financial Services Conduct Authority (FSCA), FXChoice stated.
Mirror Trading International (MTI) was a scheme that claimed to offer automated trading services — initially in forex, and later in cryptocurrency derivatives — with growth rates of between 0.5% and 1.5% per day.
It was declared the biggest cryptocurrency scam of 2020 by Chainalysis.
MTI collapsed after CEO Johann Steynberg disappeared in December, allegedly while travelling in Brazil. The FSCA suspects that Steynberg fled to Panama via Brazil.
“The FSCA have authorised the dispersal of MTI’s frozen funds at FXChoice to the appointed liquidators,” FXChoice said in its statement.
“We confirm that the transfer has now been completed and we consider the matter closed.”
While FXChoice did not say how much bitcoin it had transferred, the FSCA’s head of investigations and enforcement, Brandon Topham, recently told the Moneyweb Crypto podcast that it was around 1,200 BTC.
A separate industry source has confirmed to MyBroadband that the figure of over 1,200 BTC is accurate.
Topham said that he was not aware of any other assets that have been located or recovered yet. The funds recovered from FXChoice will therefore be the first.
MyBroadband contacted the FSCA for comment, and Topham explained that the bitcoin was not transferred to the FSCA, but directly to the liquidators. He directed all further queries to the liquidators.
Liquidator Investrust did not respond by the time of publication.
Mirror Trading International and FXChoice
MTI started off as a more conventional “copy trading” service, but changed its operating model after incurring substantial losses in May/June 2019.
The surge in growth of the scheme came after it adopted a multilevel marketing referral system and posted consistent profits after purportedly switching to an automated trading program, or “bot”.
During this initial period, MTI claimed to use FXChoice as its broker. However, FXChoice cut MTI off and froze its assets on 10 June 2020.
“MTI opened an account declaring that all the funds they were going to trade were their own,” FXChoice stated in August last year.
FXChoice’s statement came after several regulators around the world had issued warnings about MTI. MTI had also continued to use FXChoice in its marketing material even though its account had been suspended.
By August 2020 the Texas State Securities Board, Canada’s Autorité des Marchés Financiers, and South Africa’s Financial Sector Conduct Authority had all issued warnings about MTI — after FXChoice had already frozen the account.
According to FXChoice, MTI’s account was first opened in 2017 under the personal profile of its CEO, Johann Steynberg.
“We didn’t notice any suspicious activity with the trading volume and the deposits were small,” said FXChoice.
“Their activity picked up in May 2020; by this time, the account had been converted to corporate status. This was when the deposits and trades were made.”
FXChoice said that due to large deposits, and the fact that FXChoice was mentioned in MTI’s marketing videos, it decided to take a closer look at the account.
As a result, MTI’s account with FXChoice was locked until MTI could produce the necessary documentation, which it never did.
FXChoice said its decision was proven to be the right one as the warnings from regulators started coming out.
“We want to make it clear that the information naming FXChoice as the broker where MTI executes its Forex operations is inaccurate,” FXChoice stated.
“The same can be said about their claims of using artificial intelligence software. Before the account was blocked, they executed just a few trading operations, which were performed manually, large, and incurred substantial losses.”
The bitcoin that lay frozen in MTI’s old FXChoice account has now been transferred to liquidators in South Africa.
MTI has been provisionally liquidated and its final liquidation hearing has been postponed until 31 May 2021.
One faction within the MTI membership and former leadership are calling for MTI to be placed in business rescue rather than liquidation. Another faction is asking for a Section 155 compromise.
Should MTI be liquidated, the appointed liquidators could use the recovered funds to pay people back a small portion of the money they lost by investing in MTI.
Billions in Bitcoin transferred to top MTI earners
Despite the warnings from regulators and many others that MTI was likely a scam, thousands of people continued to invest their money in the scheme between August and December 2020.
According to Chainalysis, MTI received $588 million (R8.8 billion) worth of bitcoin across more than 470,000 transactions, primarily from exchanges, but also from self-hosted wallets.
Data from the MTILeaks, released in September 2020 by a group calling themselves Anonymous ZA, showed that as at 14 September 2020 nearly 23,000 bitcoin had been deposited into the scheme.
At the time, 23,000 bitcoin was worth roughly R4 billion. At today’s exchange rates it amounts to over R16 billion.
This money flowed up the MTI multi-level marketing rewards structure, with the MTILeaks showing that some of the more prominent promoters of the scheme had withdrawn millions of rands in profit before its collapse.
Given that many more people deposited money into the scheme between September and December, it can be concluded that the recovery of 1,200 bitcoin is less than 5% of the total funds invested in MTI.
Even though it is worth over R1 billion at today’s exchange rates, when split equitably over everyone who lost money in MTI the recovered funds will not stretch far.