Co-founders, Johann Steynberg and Clynton Marks along with members of the management and marketing team at Mirror Trading International (MTI) have been dragged to court for running a trading platform in what amounted to a Ponzi Scheme.
Mirror Trading International was formed in Johannesburg in April 2019 and initially marketed as an online investment platform that integrates advanced digital software and artificial intelligence to trade in the Forex markets.
The company included Bitcoin trading in its portfolio and investors’ money was allegedly pooled into one account with a broker handling it. They further alleged that MTI was trading profitably on all platforms with the Bitcoin investment growing by at least 1.5% per month.
Investors were led to believe that MTI had an extraordinary artificial intelligence bot coded by Steynberg (or a member of his team) that allowed them to predict market trading activity with exceptional precision.
The trouble began when Steynberg and Marks communicated to their investors that due to regulatory concerns, MTI was to move the entire Bitcoin trading pool from a leading established forex broker, FX Choice to an unlicensed new platform called Trade 300.
At the time FX Choice had flagged and frozen approximately 1,282 Bitcoin in the MTI account but the company assured investors that the frozen Bitcoin belonged to Steynberg personally and did not form part of their pooled investment.
An investigation from the South African financial regulator, Financial Sector Conduct Authority, uncovered that the frozen Bitcoin did indeed belong to MTI as part of the investor pool but this was only one of the locations that investors’ Bitcoin had been transferred to.
The rest of the investor pool was found to have been deposited away from FX Choice in other wallets on accounts managed and controlled by MTI, Johann Steynberg, Clynton and Cheri Marks as well as members of the management and marketing team of MTI.
To top it all off, it was also found that “the new trading platform”, Trade 300 was simply an alter ego for Steynberg himself and part of the payout expected to go to Trade 300 had gone to a gambling service, Cloudbets.
MTI operated on the standard Ponzi scheme business model where later entrants’ deposits were used to payout early investors and by its implosion in December 2020, the company was expected to have about 22,000BTC valued at over $800 million at the time.
Records showed that the company did not make any profits from Bitcoin trades and when investors called for liquidation, their demands amounted to 6,900BTC (over $290 million then) as the difference between the deposits and payouts made.
On the other hand, the company itself had no records of corporate governance, transparent financial accounting or bookkeeping and no registration for MTI employees’ tax or Value Added Tax.
Investors who realized that the company they had invested in was practically insolvent from its inception are calling for MTI’s liquidation and filed papers stating that MTI was an unlawful business giving financial services without the necessary licence from the FSCA.
The liquidators’ claim included the fact that MTI also conducted a collective investment scheme without being registered as a manager and participated in a fraudulent financial transaction in contravention of the South African Consumer Protection Act.
While a section of the investors are against the claim insisting that the company is still solvent enough for them to recover their investment, the liquidators have appealed to the Pretoria High Court to summon 18 members of the MTI management team for running and involving them in an insolvent platform.