At the first meeting of creditors held with the Master of the High Court on 5 November, the provisional liquidators of Mirror Trading International resolved to reject all claims that the scheme’s former members had submitted.
In a statement to MyBroadband, the liquidators explained that the creditors—former members of the scheme—do not yet have to resubmit their claims.
The liquidators will verify all the claims that have been submitted and inform those members whose claims were rejected to resubmit.
Mirror Trading International (MTI) was a bitcoin-based investment scheme that Chainalysis named the biggest cryptocurrency scam of 2020.
MyBroadband exposed the operation’s inner workings in September 2020 after receiving a tip from a group calling itself Anonymous ZA, which said it had exploited a fundamental security flaw in MTI’s “back office” software to obtain a copy of the database containing transaction and member information.
In October, the Financial Sector Conduct Authority conducted dawn raids on the MTI offices and the homes of its two shareholders. In December, MTI CEO Johann Steynberg disappeared, and the scheme came to a grinding halt.
The liquidation of MTI faced delays after being opposed in court, but a final order was eventually handed down at the end of June 2021.
Four months later, the first meeting of creditors finally happened.
MyBroadband learned ahead of the meeting that there was a plan for all member claims to be scrapped.
Not all of the liquidators were on board with the plan, and we contacted them for clarification.
However, rather than answer our questions, the liquidators issued a self-congratulatory joint media statement to tell the press and former MTI members how busy they have been.
Only after MyBroadband obtained a recording of the meeting with the Master of the Court did the liquidators finally answer our questions.
“As in most large estates where there are many claims, some are good, and some are bad,” the liquidators told MyBroadband in a statement issued by their spokesperson.
“If every claim had to be inspected and debated separately, the first meeting would take about 40 days of debates and arguments, which would result in an escalation of legal costs with little or no benefit to MTI creditors (members).”
To have a meeting of 40 days—held at best on a day or two per month—would mean that another year would be wasted in first meeting fights, the liquidators said.
“A more responsible approach had to be worked out.”
According to the liquidators, another problem is that the court has not yet pronounced on the complex issues of the possible illegality and the consequences of the scheme.
These issues could be debated for months, and the Master had already considered postponing the creditors’ meeting for many months pending the outcome of the case where the court will pronounce on these issues, they said.
“Against the above background, it was agreed between the various representatives of both the liquidators and the creditors (members) to close the meeting to avoid expensive delays, and to have all the provisional liquidators and Mr [Chavonnes] Cooper appointed as final liquidators.”
The effect of rejecting all claims for resubmission to the Master of the Court at a later date was that no voting for the final liquidators would take place at the first meeting of creditors.
The provisional liquidators were therefore all appointed as final liquidators. As part of whatever deal they made to move forward, Cooper was also appointed.
Regarding the consequences of rejecting all claims, the liquidators said they will now verify them all against the MTI back-office data and any other information and documents at their disposal.
“The claims will then be either compromised and/or accepted in terms of Section 78(3) of the Insolvency Act, Act 24 of 1936, read together with the Companies Act, Act 61 of 1973,” they said.
“Every creditor will have every opportunity to have their claim admitted once the correct amount is verified.”
Only claims that remain rejected by the liquidators after the verification process will have to be resubmitted.
“Creditors will be informed after the verification process has been completed of the findings,” the liquidators stated.
“Kindly note that the liquidators reserve their rights to amend the process set out above if it is deemed necessary and to the benefit of the general body of creditors.”
Liquidators’ progress update
In a statement issued on 11 November, the liquidators outlined the progress they have made.
According to their report, they have recovered cryptocurrency and assets worth over R1.1 billion.
The bulk of this was blind luck — Belizian broker FX Choice had frozen an account linked to MTI containing around 1,281 bitcoin.
The liquidators sold this bitcoin for over a billion rand earlier this year. A source with knowledge of the matter said the amount was around R1.1 billion.
Even though this was a stroke of luck, credit must be given where it is due.
The liquidators reported that they recovered the following:
- Three properties belonging to Johann Steynberg worth R6.5 million
- Cryptocurrency worth R2.1 million belonging to Johann Steynberg
- Silver worth R1.4 million belonging to Johann Steynberg
- Monthly payments made to Steynberg’s wife, Nerina, of R933,000
- Two 2020 model Jaguars belonging to Steynberg worth R3.2 million
They have also potentially traced cryptocurrency wallets linked to Steynberg and MTI in Seychelles.
“Numerous further claims against third parties have been identified and will be pursued by the trustees of Steynberg,” the liquidators said.
“Once all relevant bank statements, crypto wallets, and electronic data have been duly analysed, further claims will undoubtedly be uncovered.”
The liquidators also retrieved the MTI back-office database from the scheme’s host in India, Maxtra Technologies.
“The database, together with the information obtained through the inquiry, is the key to all other legal processes to follow to recover unlawful gains, commissions, and bonuses from investors and recover voidable dispositions in terms of Sections 26, 29, and 30 of the Insolvency Act,” the liquidators stated.
They also reported interrogating nearly 60 individuals since the court granted the final liquidation order against MTI.
“Regarding claims of some so-called MTI management members or heads of departments, it was clearly discovered that they received excessive remuneration packages and, since approximately October 2020, an additional Bitcoin per person per month,” the liquidators reported.
“It undoubtedly constitutes dispositions without value, and it is doubtful that any employee can still have a claim for arrear salaries against MTI, according to the liquidators.”