Going after the kingpins of South Africa’s biggest pyramid scheme in history

While Mirror Trading International’s liquidators are serving summons on everyone who made money on the scheme, it remains unclear whether the scam’s kingpins will face criminal charges.
MTI CEO Johann Steynberg reportedly died last month while under house arrest in Brazil, but many of the serial scammers who were leaders in the scheme remain at large.
Mirror Trading International (MTI) was the biggest pyramid scheme ever operated in South Africa.
It launched in 2019 and drew in members worldwide by promising average monthly returns of 10%. It also offered ways for members to earn substantial bonuses by recruiting more people into the scheme.
Even using the much lower bitcoin price of around R500,000 at the time of the scheme’s collapse, the lowest estimates value MTI at R14.7 billion.
At the current bitcoin price of around R1,200,000, this becomes R35.3 billion.
This dwarfs all other South African pyramid and Ponzi-type schemes for which estimated deposits are available, including Krion, Travel Ventures International, and the Africrypt “Bitcoin Brothers”.
MTI made headlines in September 2020 when a group calling itself Anonymous ZA exploited vulnerabilities in the scheme’s poorly-coded website.
Together with a MyBroadband investigative journalist and community members, the group exposed the inner workings of MTI.
Financial regulators globally also started issuing warnings against MTI just before this, including South Africa’s own Financial Sector Conduct Authority (FSCA), which advised members to request refunds on 18 August 2020.
Unfortunately, the FSCA’s warning came too late.
The scheme collapsed after Steynberg “disappeared” in Brazil on 15 December 2020. An application to liquidate the company was filed on 20 December.
In recent months, MTI’s liquidators have issued summonses on everyone they could find who withdrew any money from the scheme within six months of this date.
The summons demands that former members return all the bitcoin they withdrew from the scheme or pay back the cryptocurrency’s current rand value.
For some of the scam’s victims, this is a devastating blow.
If they bought 0.01 bitcoin for R1,670 on 1 July 2020, they would have to pay back the liquidators over R12,000 today.
Therefore, anyone who followed the FSCA’s advice is now required to repay the liquidators at a much higher rate than they originally bought their bitcoin for.
When asked why they were clawing back all withdrawals rather than the difference between someone’s withdrawals and deposits (i.e. profits), the liquidators said this was to ensure fairness for all victims.
“The effect of Section 29 of the Insolvency Act is often viewed by innocent investors as extremely harsh and unreasonable,” said Herman Bester, one of MTI’s liquidators.
Bester explained the legislation was designed to balance the interests of creditors who didn’t make any withdrawals and lost everything, as well as those who withdrew some or all of their funds from the scheme before it collapsed.
However, most recently, the liquidators obtained permission to summons members by sending them an email, SMS or WhatsApp, and by placing notices in various news publications.
According to their notice, these new summonses only demand the amount withdrawn in excess of what was originally deposited.
In addition to going after former MTI members who profited from the scheme in South Africa, the liquidators have also filed roughly 200 complaints in the United States against net winners.
BehindMLM has published the first 150 names listed in these adversary proceedings on its website.
Several of the complaints involve well over $100,000 each, with one reaching $454,000 (R8.2 million).
Given the sheer volume of people sued, and that just five complaints totalled over $1.1 million, it’s safe to say that the liquidators are seeking millions of dollars from people who profited from MTI in the United States.
Also in the US, the US Commodity Futures Trading Commission (CFTC) obtained a default judgement against Steynberg last year for $3.5 billion (R64 billion).
The order required Steynberg to pay $1,733,838,372 in restitution to defrauded victims and a $1,733,838,372 civil monetary penalty — the highest such penalty ordered in any CFTC case.
It is unclear what becomes of this heavy financial penalty against Steynberg in the event of his death.
In addition to facing summonses for substantial sums of money from the liquidators, the kingpins of MTI could face jail time.
Barnard Incorporated Attorneys senior associate Pieter Walters previously told MyBroadband that MTI’s promoters and directors could face criminal prosecution and significant civil penalties.
“The finding that the scheme is unlawful does bolster the case of the National Prosecuting Authority (NPA), but the NPA will still be called upon to make its own findings,” Walters said.
Unfortunately, while the NPA has confirmed that it sought Steynberg’s extradition before he died, it has not commented on whether it would prosecute other people linked to the scam.
MyBroadband contacted the NPA for comment, but it did not provide feedback by publication.