Mirror Trading International – which holds the dishonour of being called one of the biggest crypto scams in the world – has been officially declared a pyramid scheme by the South African High Courts.
In a ruling this week, the Western Cape High Court said the trading platform “clearly amounted to an unlawful Ponzi scheme” and terminated all agreements between the group and its investors.
The scheme presented itself as a passive income source. According to its own explanations, users would simply deposit a minimum of $100 worth of Bitcoin, and MTI promised to grow it using an AI-powered foreign exchange trading software.
The group said that customers could achieve consistent daily returns of 0.5%, translating to yearly gains of 500%. Algorithmic trading is a common premise for many cryptocurrency investment scams.
However, the courts found no evidence that trading was taking place, and that the so-called “artificial intelligence bot” never existed. The remarkable trading results presented to investors, meanwhile, were simply false.
MTI was put into provisional liquidation on 29 December 2020, and a final liquidation order was granted against the scheme on 30 June 2021.
The platform first made headlines in September 2020 when a group calling itself Anonymous ZA exploited vulnerabilities in its poorly-coded website. Together with a MyBroadband investigative journalist and community members, the group exposed the inner workings of MTI.
Data firm Chainalysis named MTI as 2020’s biggest investment scam.
Trouble for MTI boss
MTI CEO Johann Steynberg travelled to Brazil in the weeks before MTI finally imploded, and was arrested a year later for allegedly presenting a false passport to police.
The Commodity Futures Trading Commission (CFTC) in the United States has ordered Steynberg to pay close to $3.5 billion (R63.6 billion) in restitution and penalties over the scheme.
“The order finds that Steynberg, the founder and CEO of Mirror Trading International Proprietary Limited MTI, a company currently in liquidation in the Republic of South Africa, is liable for fraud in connection with retail foreign currency transactions, fraud by an associated person of a commodity pool operator, registration violations, and failure to comply with CPO regulations,” the CFTC said.
The order requires Steynberg to pay $1.7 billion in restitution to defrauded victims and a $1.7 billion civil monetary penalty, which is the highest civil monetary penalty ordered in any CFTC case, it said.
“The order finds that, from approximately May 2018 through approximately March 2021, Steynberg, individually and as the controlling person of MTI, engaged in an international fraudulent multilevel marketing scheme to solicit Bitcoin from members of the public for participation in an unregistered commodity pool MTI operated.
“MTI and Stynberg controlled the commodity pool and purportedly traded off-exchange, retail forex through what they falsely claimed was a proprietary ‘bot’ or software program.
“During this period, Steynberg, individually and as the principal and agent of MTI, accepted at least 29,421 Bitcoin—with a value of over $1,733,838,372 at the end of March 2021—from at least 23,000 individuals in the US, and even more throughout the world, to participate in the commodity pool without being registered as a CPO as required.
“Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants.”