R1.6 billion claimed against South Africa’s biggest ever pyramid scheme

Claims against failed pyramid scheme Mirror Trading International have grown to over R1.6 billion, with over 8,000 proven creditors as of end-April.

The Mirror Trading International (MTI) estate has around R637 million remaining in its accounts, with legal action pending in over a dozen countries to claw back withdrawals from people who profited from the scheme.

This is according to court documents filed in response to an attempt to convert the scam’s liquidation into a business rescue.

MTI was the biggest pyramid scheme ever operated in South Africa, and Chainalysis declared it the world’s biggest crypto scam of 2020.

The database obtained from MTI’s web development and hosting company in India, Maxtra Technologies, showed that 39,193.3 bitcoins were deposited into the scam.

Even using the much lower price of R500,000 per bitcoin at the time of the scheme’s collapse, MTI would be an almost R19.6 billion scam.

Launched in 2019, MTI 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.

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 the scam.

It collapsed in December 2020 after its founder and CEO, Johann Steynberg, vanished while travelling in Brazil. He was arrested almost exactly a year later for using a fake ID.

Under house arrest and facing extradition to South Africa, Steynberg reportedly died in April 2024 after suffering a massive bilateral pulmonary thromboembolism.

Johann Steynberg, former Mirror Trading International CEO arrested in Brazil in December 2021

Shortly after Steynberg’s initial disappearance, liquidation proceedings were instituted against MTI.

By sheer stroke of luck, and with the help of the Financial Sector Conduct Authority, the liquidators recovered 1,281 bitcoins that MTI’s former brokerage, FXChoice, had frozen.

According to FXChoice, the funds were frozen in June 2020 after it detected suspicious activity and conducted an internal investigation on the account.

This was a month before the first official warning about MTI was issued by the Texas Securities Commission.

Thanks to FXChoice’s swift action and the timing of MTI’s liquidation, the liquidators secured over a billion rands for the estate.

The first liquidation and distribution account revealed that they banked R1,057,932,714 from selling the bitcoins on Luno, one of South Africa’s largest cryptocurrency exchanges.

Luno pocketed a 1% commission for the trade — roughly R10.6 million.

The funds were placed in an investment account where it earns millions in interest every month.

The taxman soon came for its pound of flesh, initially lodging a claim for over R931 million. The liquidators settled SARS’ claim for R283 million.

They also secured their first liquidation fees of R138.5 million.

Looking at the remaining investment account balances and factoring in the interest earned, the liquidators have paid around R144 million in lawyers’ fees and other costs.

While roughly R637 million remains in the liquidators’ accounts, they are busy pursuing people who profited from the scheme around the world.

Their attorneys have issued hundreds of summonses in South Africa, filed 149 adversary complaints in the United States, and taken action against hundreds more in Belgium, Namibia, Canada, Germany, Sweden, and the UK.

They are also tracing 129 people in Australia who withdrew money from MTI before it collapsed.

Mirror Trading International

MyBroadband contacted the liquidators to ask whether they believe they can claw back more money than they spend on legal fees. They did not give feedback by publication.

However, correspondence between law firm Schabort & Potgieter and the liquidators revealed the minimum withdrawal amounts the attorneys were instructed to pursue in certain countries.

Amounts are also publicly available for some of the complaints the liquidators filed in the United States.

Adding these all up gives a rough minimum of R300 million that the liquidators are pursuing overseas.

No amounts for Canada and Australia were available. The liquidators are still pursuing recognition as the designated foreign bankruptcy proceeding in Switzerland, New Zealand, Brazil, and Japan.

They are also attempting out-of-court settlements in Korea and Finland.

Schabort & Potgieter have also recommended that the liquidators pursue people who withdrew from the scheme in Norway, Hong Kong, Ireland, and Mauritius.

The liquidators have yet to decide how to proceed in 31 other countries.

Therefore, the amounts recovered from overseas proceedings may still become much higher.

However, if the liquidators maintain their approach of clawing back all withdrawals and demanding that people lodge claims for their original deposits, total claims will also balloon.

According to the court documents, claims against the estate stood at R1,623,937,065 on 23 April 2024. The liquidators have received 8,872 claims.

The liquidators have been demanding that people pay back the bitcoins they withdrew at the current price, and lodge claims for their original deposits similarly.

MyBroadband asked the liquidators whether claims would be substantially less if amounts were calculated using the bitcoin exchange rates at the date of deposit and withdrawal, rather than at date of claim.

MTI’s liquidators did not provide feedback by publication.