The Financial Sector Conduct Authority (FSCA) has opened a criminal case against Mirror Trading International, stating that the company and its senior management are conducting an illegal operation, are misleading clients, and have contravened several laws.
The FSCA also said that Mirror Trading International (MTI) is not licensed to offer financial services and has not applied for such a licence.
News of the FSCA’s findings and criminal complaint against MTI follows a warning from the regulator in August that people should withdraw their money from the scheme.
It also comes after a group calling themselves AnonymousZA leaked a redacted version of the entire MTI database, including account balances, providing insights into how the scheme was run.
MTI and FXChoice
According to the FSCA, when MTI started trading in April 2019 it transferred members’ bitcoin, which had been deposited into its wallets, to a forex platform called FXChoice.
The CEO of MTI, Mr Cornelius Johannes Steynberg, has actively assisted in the operations by Mr Clynton Hugh Marks and Mrs Cheri Marks.
The FSCA said that Steynberg testified under oath that, from April 2019 to July 2019, member trading accounts were linked to a professional trader appointed by MTI through a multi-account manager arrangement linked to Meta Trader 4. Trading was conducted in derivative instruments based on forex pairs.
The FSCA reported that Steynberg stated that MTI experienced substantial losses of up to 80% during this period and, as a result, MTI requested its members to delink their respective accounts from the multi-account manager account and move their bitcoin to a pooled account.
Steynberg claimed that from August 2019, MTI employed a bot — high-frequency artificial intelligence trading — together with a head trader and trading team to make all its trading decisions, with great success.
“The Authority found evidence contradicting this assertion,” the FSCA stated.
Evidence contradicts MTI claims, FSCA claims
“During October 2020, after the FSCA informed MTI that it was a conducting an illegal unregistered financial services business, MTI claimed that it changed its trading activities to trade in derivative instruments based on cryptocurrency (Bitcoin), so that it no longer fell within the jurisdiction of the FSCA, and that it no longer required a [financial services provider] licence,” the FSCA reported.
MTI’s statements that it no longer required an FSP licence were incorrect, the FSCA said.
“The submissions received from Steynberg revealed that the cryptocurrency was alleged to be traded in the form of a derivative product, which would have required registration with the FSCA as well,” the regulator said.
Crucially, the regulator said it has found no evidence that any cryptocurrency trading is actually being conducted as communicated with members of MTI.
The FSCA said it obtained evidence from FXChoice, MTI’s first “broker of choice”, which suggested that MTI had provided clients with falsified trading statements.
Trading statements provided by MTI to its clients were based on a demo trading account and not actual trades, the FSCA found.
As a result of the queries it received from MTI clients, and the discovery that MTI had passed off demo account activity as actual trades, FXChoice said it froze the balance of crypto assets linked to MTI on its platform.
“FXChoice confirmed that MTI put in 1846.72 bitcoin from 29 January 2020 until 3 June 2020 and made a loss of 566.68 bitcoin, an approximate capital loss of 30%,” the FSCA stated.
“The total frozen crypto assets on FXChoice is a negligible amount, taking into account the total assets that MTI claimed it invested on behalf of its clients,” the FSCA said.
The FSCA reported that Steynberg and the head of communications at MTI, Cheri Marks, claimed that the trading activities of MTI were moved from FXChoice to Trade300.
“According to Steynberg, Trade300 is another online trading platform,” stated the FSCA.
It noted that at Trade300 MTI experienced the same extraordinary profits utilising the bot, but at this stage trading in crypto derivatives.
“Steynberg stated under oath and repeatedly in the press that the bot trading averaged a return of 10% per month, and that MTI has never had a negative profit trading day, but for one exception. Marks also repeatedly confirmed the trading successes on social media.”
The FSCA said it tried to track down Trade300 to obtain a statement and trading details from it to verify MTI’s version of events.
“MTI did not provide any useful details that assisted the FSCA,” the regulator stated.
According to the FSCA, it followed all possible links on the Internet to establish whether Trade300 existed. It could only find one reference to Trade300 — its own website.
“The website was, and still is, ‘under maintenance’, and the only reference linked to the website is the name of ‘Joe Steyn’, a known alias of Steynberg,” said the FSCA.
“The FSCA obtained search and seizure warrants and executed them at the homes of Steynberg and Marks, and the offices of MTI. On the desktop computer of Steynberg, the investigation team found evidence relating to Trade300. It would therefore appear that Trade 300 is linked to Steynberg.”
Following the money
As a further effort to verify the evidence of MTI, Steynberg and Marks, the FSCA said that it requested information from MTI about the transfer of clients’ assets from FXChoice to Trade300.
MTI provided evidence of the transfer in the form of Bitcoin wallets and stated that it transferred 16,444 bitcoin from FXChoice to Trade300 in four instalments on 21 July 2020, 22 July 2020, and 24 July 2020.
However, the FSCA said it found that no withdrawal of Bitcoin by MTI from FXChoice occurred in July 2020.
“The last withdrawal of bitcoin by MTI from FXChoice was conducted in August 2019,” the FSCA said.
FXChoice also confirmed to the FSCA that none of the eight sending wallets provided as evidence by MTI are related to FXChoice, and that FXChoice had neither received deposits from nor sent any payments to any of these eight bitcoin wallets.
Further investigation of the wallets provided by MTI showed that their transaction activities bear no resemblance to the purported activities of MTI, the FSCA stated.
“We have found no evidence of any significant store of crypto assets on any trading platform, and that most crypto balances appear in the name and under control of Steynberg,” the FSCA reported.
“The amount of such balances is well below the advertised balance on the MTI trading platform as being due to investors of MTI.”
The FSCA said that in the past few days, it has received complaints that investors were unable to redeem their investments.
“The investigation is ongoing, and a criminal case has been opened by the FSCA with the South African Police Services.”
MyBroadband contacted MTI and the FSCA for comment, but neither organisation immediately responded.
The full FSCA statement is embedded below.