Major problem in Mirror Trading International case

The hearing for the application to have get-rich-quick scheme Mirror Trading International (MTI) declared an unlawful or illegal scheme has been postponed until 2 March 2022.

Acting Justice Alma de Wet set the new date in an order issued on Wednesday, along with a series of deadlines for additional court papers to be filed.

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.

De Wet granted the final liquidation order against MTI on 30 June 2021.

Before this week, MTI hearings were mostly attended by two legal teams — those representing the liquidators, and the one representing Clynton and Cheri Marks.

Clynton Marks is a 50% shareholder of MTI and opposed the liquidation of MTI. Until this week, he was also the only opponent to the liquidators’ bid to have MTI declared an unlawful scheme.

However, on Wednesday, 8 September, twenty lawyers filed into De Wet’s courtroom.

Johann Steynberg
Johann Steynberg, Mirror Trading International CEO

Each team of two or so legal eagles represented a faction in the fight.

Three of the new teams were recognised as respondents in the case to have MTI declared an unlawful scheme. They included those representing Henry Robert Honiball, Cecil John Jacob Rowe, and “All member/investors of Mirror Trading International (Pty) Ltd”.

Between these teams of lawyers, they claimed to represent the interests of hundreds of members who had signed affidavits opposing the declaration of MTI is a pyramid or Ponzi scheme.

MyBroadband understands that so many members came out in opposition to the application because of concerns of the powers the liquidators were seeking.

MTI members were being told that the liquidators were seeking powers that would allow them to claw back the withdrawals of all members, even if they lost money in the scheme.

In other words, if you deposited R100,000 in MTI and withdrew R50,000, members were being told the liquidators could come for the R50,000 you withdrew.

Another concern in the water supply of the various MTI Telegram groups is that if MTI is declared a pyramid or Ponzi, that all profits would be declared proceeds of a criminal enterprise and would be forfeited to the state.

Many members, therefore, fear that they will not only be required to pay back withdrawals but that they would also not receive a cent from the liquidation if MTI is declared unlawful.

The liquidators have refuted these claims.

“It is not correct that having the business model of MTI declared a fraudulent and illegal scheme would allow the liquidators to seize all of the money that flowed into the scheme,” they said.

“Liquidators will only be entitled to recover payments made to investors which were not legally owed to them.”

Experts have also pointed to the Krion case, where members received payments from the recovered estate after it was declared an unlawful scheme.

In the order to postpone the MTI case to next year, De Wet set out the following deadlines:

  • Applicants are granted until 30 September 2021 to supplement their affidavits in support of the relief that they seek.
  • The Financial Sector Conduct Authority is granted until 30 September 2021 to file a further affidavit, should it choose to do so.
  • Any party forming part of the “All member/investors of MTI” group, and wishing to oppose or support the application must email [email protected] on or before 20 September 2021.
  • Any party forming part of the “All member/investors of MTI” group that wants to support MTI being declared an unlawful scheme have until 30 September 2021 to file an affidavit in support thereof.
  • All parties are granted up to 13 October 2021 to file a notice in terms of Section 35(14) of the Insolvency Act.
  • Any further affidavit intended to be filed in opposition, by any party, shall be filed by no later than 10 January 2022.
  • Replying affidavits shall be filed by no later than 31 January 2022.

Now read: FBI joins Mirror Trading International investigation

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Major problem in Mirror Trading International case