The National Prosecuting Authority (NPA) says it is investigating co-conspirators and associates of the late Johann Steynberg, Mirror Trading International’s former CEO.
Steynberg reportedly died last month while under house arrest in Brazil, but many of the serial scammers who were leaders in his pyramid scheme remain at large.
NPA media relations director Isaac Dludlu told MyBroadband that they haven’t brought charges against anyone yet.
However, the matter is under investigation, and they are looking into several possible charges.
These include fraud or theft, forgery, contraventions of the Prevention of Organized Crime Act, and contraventions of the Financial Advisory and Intermediary Services Act.
Mirror Trading International (MTI) was the biggest pyramid scheme ever operated in South Africa.
It launched in 2019 and 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.
Even using the most conservative estimates for the scheme’s value at the time of its collapse, at least R14.7 billion worth of bitcoin flowed through it.
This dwarfs all other South African pyramid and Ponzi-type schemes for which estimated deposits are available, including Krion, Travel Ventures International, and the Africrypt “Bitcoin Brothers”.
Barnard Incorporated Attorneys senior associate Pieter Walters previously told MyBroadband that MTI’s promoters and directors could face criminal prosecution and significant civil penalties.
“The finding that the scheme is unlawful does bolster the case of the National Prosecuting Authority (NPA), but the NPA will still be called upon to make its own findings,” Walters said.
In addition to facing a criminal investigation, MTI’s kingpins are being targeted by the scheme’s liquidators.
However, a liquidation’s powers to claw back profits withdrawn from an unlawful scheme like MTI are a dragnet that traps victims and scammers alike.
In recent months, MTI’s liquidators have issued summonses on everyone they could find who withdrew any money from the scheme within six months of 20 December 2020 — the date of the original application to liquidate it.
The liquidation application was made five days after Steynberg “disappeared” in Brazil and MTI collapsed.
The summons demands that former members return all the bitcoin they withdrew from the scheme or pay back the cryptocurrency’s current rand value.
For some of the scam’s victims, this is a devastating blow.
If they bought 0.01 bitcoin for R1,670 on 1 July 2020, they would have to pay back the liquidators over R12,000 today.
When asked why they were clawing back all withdrawals rather than the difference between someone’s withdrawals and deposits (i.e. profits), the liquidators said this was to ensure fairness for all victims.
“The effect of Section 29 of the Insolvency Act is often viewed by innocent investors as extremely harsh and unreasonable,” said Herman Bester, one of MTI’s liquidators.
Bester explained that the legislation was designed to balance the interests of creditors who didn’t make any withdrawals and lost everything, as well as those who withdrew some or all of their funds from the scheme before it collapsed.
The liquidators aren’t only going after South African members. They have also filed roughly 200 complaints in the United States against net winners.
BehindMLM has published the first 150 names listed in these adversary proceedings on its website.
Several of the complaints involve well over $100,000 each, with one reaching $454,000 (R8.2 million).
Given the sheer volume of people sued, and that just five complaints totalled over $1.1 million, it’s safe to say that the liquidators are seeking millions of dollars from people who profited from MTI in the US.
In Australia, the Sydney Morning Herald reported that the liquidators aim to claw back money from 5,250 people believed to have profited from the scam.
This is after the liquidators received recognition in Australia for the South African liquidation to be considered the designated bankruptcy proceeding.
The liquidators have received similar recognition in the UK, Canada, and Belgium.
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