Mirror Trading International’s liquidators have hit back at claims that victims would lose money if the scheme were declared unlawful.
According to the liquidators, this argument is being furthered by some of the scheme’s investors and their legal representatives.
In a circular issued by Investrust on behalf of the liquidators to Mirror Trading International (MTI) creditors on 11 February 2022, they stated that the scheme was unlawful and claims to the contrary were unsubstantiated.
“The available evidence is overwhelming and uncontroverted: MTI was a massive fraudulent scam, and this will remain the position,” Investrust said.
The liquidators maintained that having the scheme declared unlawful by a court was in the best interest of those who were net-losers of MTI.
“Losers should not be fooled into the idea that it is simply a scheme that collapsed due to bad trading. It never was,” the liquidators stated.
“It was a scheme run by top-tier investors and promoters to milk Bitcoin from later investors and the lower tiers daily.”
The liquidators’ application for the liquidation of MTI is set to be heard in the High Court on 2 March 2022.
The liquidators addressed what they called a “misconception” that if MTI were declared an unlawful scheme, it would change the rights of the liquidators to claw back ill-gotten gains from winners, and the rights of net-losers to prove a claim for the lost capital portion of their investments.
“This perception is not correct,” the liquidators said.
They said that one of the advocates representing a group of creditors, Hendrik van Staden, has told his clients that having the scheme declared unlawful would result in all investors losing their claims against MTI.
It is interesting to note that Van Staden was one of the advocates who prepared the original liquidation application against MTI.
Van Staden also warned that the assets of MTI would be forfeited to the State, they said.
“This statement is completely wrong and disingenuous. The legal position in these circumstances is trite,” the liquidators said.
“It is irresponsible and shockingly inaccurate statements like this, that cause investors to unfairly question the motives and integrity of the liquidators.”
Investrust explained that once a liquidation application was in place, the liquidation process trumped the asset forfeiture process.
The liquidators also said if the court was not ready to declare MTI a pyramid scheme, it would simply mean they would have the additional burden to produce all the evidence of the scheme’s unlawfulness in each case they institute to recover ill-gotten gains.
“In other words, it does not automatically follow that, if the High Court were not prepared to declare the scheme unlawful at this stage, MTI is then considered to be a lawful scheme,” they explained.
“It will simply have the effect that the liquidators will have to prove the unlawfulness each time that they rely on that fact in a recovery process.”
The liquidators said that the application to declare the scheme was unlawful sought to prevent this situation, which would result in substantially higher legal costs, considering the voluminous nature of the available evidence proving the unlawfulness of the scheme.
Bitcoin still with winners
The liquidators also quashed claims that the scheme was still solvent.
The liquidators said that claims against the scheme were accumulating daily and were very close to a point where the value of claims lodged would exceed the value of the available funds.
According to MTI’s records, the number of Bitcoin which was supposed to be in MTI in December 2020, when it imploded, was approximately 22,000.
The liquidators have only been able to recover 1,282 Bitcoin to date.
“This was not due to the making of [Johann] Steynberg and his cohorts, but simply due to the fortuitousness of [Belize-based brokerage] FX Choice blocking the wallet in which these coins were held,” the liquidators said.
“All other Bitcoin were either stolen, or paid to investors who withdrew Bitcoin at an earlier stage.”
The liquidators said that a “sizable dividend” would be paid to creditors based on their current projections.
However, a fine of R50 million, which the Financial Sector Conduct Authority is claiming, and a potential tax claim from the SA Revenue Service might still have to be factored in.