Shocking twist in multi-billion Mirror Trading International case

Startling allegations against the liquidators of Mirror Trading International (MTI) and the Financial Sector Conduct Authority have come to light in court papers filed to oppose the declaration of the scheme as an illegal business.

Controversial MTI stalwarts Clynton and Cheri Marks filed the counter-application, arguing that members stand to forfeit everything to the state should it be declared a pyramid or Ponzi scheme.

Mirror Trading International (MTI) was a South African network marketing scam that claimed to offer automated trading services — initially in forex and later in cryptocurrency derivatives.

It accumulated billions of rand worth of bitcoin during 2019 and 2020.

Chainalysis named MTI the biggest cryptocurrency scam of 2020 in the most recent edition of its Crypto Crime Report.

Court documents, which MyBroadband has seen, gave the last estimate of the funds that flowed through MTI as 29,421.03379 bitcoin — close to R16.9 billion at current exchange rates.

A source with knowledge of the case has subsequently told MyBroadband that more than 46,000 bitcoin (over R26.4 billion) flowed through the scheme.

MTI collapsed in late 2020 after CEO Johann Steynberg vanished on 15 December while allegedly travelling in Brazil.

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 a provisional liquidation on 29 December 2020, and provisional liquidators were appointed on 12 January 2021.

After several delays in the case, acting Justice Alma de Wet granted the final liquidation order against MTI on 30 June 2021.

An intervening application by the liquidators to have MTI declared an unlawful business was postponed until 8 September 2021.

It is this intervening application that the Marks’ have filed a counter-application against.

Johann Steynberg
Johann Steynberg, Mirror Trading International CEO

According to the Marks’ application, the MTI members would not be able to claim back their capital bitcoin contributions if it is found they participated in an illegal scheme.

Essentially MTI members would not be creditors of the company. Instead, they would become debtors and be asked to repay all the bitcoin they withdrew from the scheme.

The Marks’ stated that the only creditor to date would be the liquidators claiming legal costs and the Financial Sector Conduct Authority (FSCA), which intends to impose a R100 million fine on MTI.

MyBroadband understands that the Marks’ are not the only parties involved in the MTI liquidation to conclude that having MTI declared a pyramid scheme could be bad for members.

A source with knowledge of the situation said that a schism has formed in the legal teams who brought the original liquidation application.

Some of the same people who helped secure the final liquidation against MTI are now opposing the motion to declare it an illegal business.

It is worth pointing out that there is an apparent inconsistency in the Marks’ reasoning regarding the FSCA becoming a creditor if MTI is declared an illegal business.

The FSCA’s fine on MTI is based on the fact that the cryptocurrency investment scheme was actually trading in derivatives at some point in its past.

Should a court declare that MTI is a pyramid or Ponzi scheme, it could by definition not have been trading, and therefore it may oppose the FSCA fine on that basis.

Johann Steynberg and Clynton Marks signing MTI shareholders agreement
Johann Steynberg and Clynton Marks signing MTI shareholders agreement

The counter-application argued two other significant points:

  • The FSCA has said it could not act against Africrypt because it was a cryptocurrency-based scheme, yet it could act against MTI, which was also a cryptocurrency-based scheme.
  • Timelines provided by MTI’s former Belize-based broker, FXChoice, do not match up to trading statements sent to Johann Steynberg.

According to the counter-application, the FSCA relied on dates provided by FXChoice in its affidavits which claims that it froze MTI’s trading account on 10 June 2020.

However, Johann Steynberg was still receiving trading statements from FXChoice on 29 June, which showed trading happening on the account.

MyBroadband contacted FXChoice for comment on these claims, but the broker did not respond by publication.

“It has been a revelation to sit down and work through the timeline with our legal team,” MTI’s former head of communications, Cheri Marks, stated.

“It has allowed us to finally confirm what we have always suspected, and that is that there are patent faults in the way this matter has been represented and conducted.”

The Marks’ counter-application has further asked the court to distinguish between Mirror Trading International (Pty) Ltd and the “My MTI Club”.

They have asked to have the roughly 1,260 bitcoin that the liquidators recovered from FXChoice, or the rand value they sold it for, returned to MTI Club.

From there they said members should be able to decide what to do with the money.

Marks said that they are happy with the work their legal team has done for the members of MTI in opposing the proceedings to have the scheme declared unlawful.

“While we sympathise with the amount of work the liquidators find themselves facing to wrap up MTI, we cannot allow for them to take shortcuts by seeking orders that will create scenarios where our members’ interests and right to oppose any matter surrounding their personal claims are put at risk,” Marks said.

MyBroadband asked the liquidator Investrust and the FSCA for comment.

The FSCA noted our questions and said it would require additional time to provide detailed feedback. Investrust did not respond by the time of publication.

FXChoice trading statement for MTI — 29 June 2020 (click to enlarge)

Update: FXChoice has stated that the trading statement contained in the Marks’ application is fake.

The article mentions that FXChoice continued to issue trading statements to Mirror Trading International after the company froze MTI’s accounts.

Of course, this is a very serious allegation, as we wrote an affidavit that no further trading activity took place after the freezing of the account.

After a brief investigation, we can confirm the trading statement in your article is fake or has been heavily doctored. The trades detailed on the statement belong to a completely different person, and the account number 190035 was used only once by MTI to transfer funds, never for trading.

For example, trade 36845225, which you can see on the statement, was indeed executed on our servers, but by a different client, at a different time, on a different currency pair. All of the trades on that statement are Demo, and executed on one Demo account.

Furthermore, in the top-right of the statement you can see our license number followed by ‘/18’, meaning this part was taken from a 2018 statement, not 2020.

Now read: E-rand for South Africa

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Shocking twist in multi-billion Mirror Trading International case