South African cryptocurrency exchange Mirror Trading International (MTI) reportedly scammed its investors out of 9.45 billion rand, equivalent to nearly $645 million as of press time.
According to a Dec. 29 report by the well-regarded English-language news outlet BusinessDay, the Cape Town High Court granted a provisional liquidation order against MTI on Tuesday.
The measure was taken following two complaints filed last week by the firm’s customers who found themselves unable to withdraw their funds.
Earlier this month, South Africa’s Financial Sector Conduct Authority (FSCA) warned that “MTI is not licenced to conduct financial services and has not applied for such a licence.” Furthermore, the document published on Dec. 17 by the regulator reads:
“The Authority believes that MTI and its senior management are conducting an illegal operation, misleading clients and have contravened several laws.”
According to FSCA’s warning, MTI allegedly started its activity in April 2019 and asked potential customers to deposit their Bitcoin (BTC) holdings to the firm’s wallet, which was fully controlled by the firm’s CEO, Cornelius Johannes Steynberg. He testified under oath that from April 2019 to July 2019 that user’s funds were managed by a professional trader appointed by the company who traded derivative instruments based on forex pairs.
Still, Steynberg claims that MTI perceived losses of up to 80% and requested its users to move their funds to a pooled Bitcoin wallet. Then—according to him—from August 2019 the firm used an artificial intelligence-based, high-frequency trading bot to manage its trading activity, which he claims was largely successful.
The regulator said it doubted this version of events, noting that it found “evidence contradicting this assertion.”
In October, the regulator informed MTI that its financial services were illegal. The firm answered by claiming that it “changed its trading activities to trade in derivative instruments based on crypto currency (Bitcoin), so that it no longer fell within the jurisdiction of the FSCA.”
Still, the regulator said that the firm’s activities did fall under its authority.
MTI customers contacted FXChoice—where the firm was allegedly conducting its trading activity—and found that the reports offered by the firm were of paper trades, not real ones. As a result, FXChoice froze the firm’s balance. But, the FSCA defined those funds as “negligible.”
The regulator’s investigation revealed that MTI’s trading efforts were not as successful as claimed: “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%.”
Steynberg is believed to have left South Africa—presumably for Brazil. The FSCA said it is cooperating with the police in ongoing proceedings against him and the firm, and MTI’s bank account has been suspended.
Most of the evidence in the case points to a scam and that the victims may never see their money again. Still, in the weird world of cryptocurrencies, there’s always hope.
As Modern Consensus reported in mid-September, SushiSwap protocol founder Chef Nomi apologized profusely and returned the $14 million in SUSHI tokens he had taken—about half of the protocol’s treasury—in what appeared to be an exit scam. At the time, Nomi said he had decided to quit the booming project and took what he felt was a fair reward for building it so fast. After returning it, he said he’d let the community decide what was a fair award.
And in November, Binance tracked down the Wine Swap DeFi protocol’s exit scammer, forcing him to return $345,000.