Greed, Crime and Punishment – MTI is a Ponzi Scheme, Steynberg fined R64 billion

Greed, Crime and Punishment – MTI is a Ponzi Scheme, Steynberg fined R64 billion

There are probably several well-worn Biblical-wrath-style platitudes you could successfully apply to Mirror Trading International’s (MTI) founder and CEO Johann Steynberg:

“Those who plough evil and sow trouble reap it.”
“Whoever digs a pit shall fall into it.”
“The trouble they cause recoils on them; their violence comes down on their own heads.”
“A man reaps what he sows.”

I could go on, but you get the idea.

And regardless of your opinion on justice – Biblical or otherwise – the bottom line is this:

Almost two years after MTI’s spectacular collapse, in what has since been labelled one of the biggest crypto scams in the world, Steynberg’s chickens may well be coming home to roost.

On April 24th, Judge Lee Yeakel of the US District Court for the Western District of Texas ruled that Steynberg stole funds from MTI members by depositing and holding their investments in his own personal e-wallets.

“Steynberg, individually and as the agent of MTI, misappropriated participants’ Bitcoin for his personal use,” he said.

Judge Yeakel ordered him to pay $1.73 billion in restitution to the defrauded victims of his unconscionable scheme. On top of that, he’s been ordered to pay an additional $1.73 billion as a civil monetary penalty.

In Rand terms (R64 billion), it’s the highest civil monetary penalty ever ordered in a case involving the Commodity Futures Trading Commission (CFTC).

It was humbling to note that, when making his ruling, Judge Yeakel was quick to praise the quality of the investigation conducted by me and my team on behalf of the Financial Sector Conduct Authority (FSCA).

One of the most important findings of the investigation was that Steynberg failed to disclose, among other things, that:

• He misappropriated pool participants’ funds by soliciting them for trading and then retaining them in his personal E-Wallets instead of segregating them in a pool account to trade on behalf of participants as promised.
• MTI was not registered with the CTFC and he was therefore operating an unlawful business enterprise.
• Monies paid out to some participants as “returns” on their investment were, in fact, the principal deposits of other participants.

In their response, the CFTC said, “The order finds that Steynberg, the founder and CEO of Mirror Trading International Proprietary Limited, 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.”

Just two days after the US ruling, the Western Cape High Court ruled MTI was an “unlawful Ponzi scheme” that generated returns for early investors by taking them from the investments of those who joined later.

The Court declared that MTI’s underlying business model was “designed and implemented to perpetrate fraud on members of the public”.

“The remarkable results presented to investors were prima facia false,” said acting Judge Alma de Wet. “The fraud perpetrated by Steynberg and MTI were not isolated incidences but rather fundamental aspects of the structure of the businesses and as such tainted the business operations of MTI as a whole.”

De Wet ruled that all agreements concluded between MTI and its investors “in respect of the trading/management/investment of bitcoin” were unlawful. 

Both the Texas and Western Cape rulings confirm earlier reporting from data analysis firm Chainalysis, which cited MTI as 2020’s biggest global cryptocurrency investment scam that operated as a “money laundering and cash out mechanism”.

But perhaps before we go any further into what these two landmark rulings might mean for Steynberg and his victims, we should refresh our minds as to how things reached this point. Before things went so catastrophically wrong for the Stellenbosch-headquartered bitcoin-trading scheme, what happened to make them go so right?

Mirror Trading International was founded and registered in Northcliff, Johannesburg, South Africa in April 2019. It presented itself as a source of passive income.

“All” you had to do was deposit a minimum of $100 worth of Bitcoin, and MTI promised to grow it using what they falsely claimed was a proprietary AI-powered foreign exchange trading software program.

Algorithmic trading is a common premise for many cryptocurrency investment scams, and Johann Steynberg used it to great effect, promising customers consistent daily returns of up to 0.5%.

Our Consumer Protection Act (CPA) defines anything that offers an effective annual interest rate of at least 20% above the repo rate as a multiplication scheme and prohibits anyone from directly or indirectly promoting, or knowingly joining or participating in such schemes.

At the time MTI was operating, South Africa’s repo rate was 3.5% per annum. Twenty percent over this would be 23.5% per annum. MTI was promising up to 500%.

Investors were, in fact, promised even bigger returns if they referred other “investors” to MTI. This led to thousands of people being talked into “investing” in MTI. The tragedy is, many were so seduced by the potential returns that they liquidated insurance policies, sold their houses, or took early retirement to be able to spend more time working on the scheme.

When things went sideways – which they did with cruel and merciless speed – thousands of people lost everything they had. Heart-rending stories of victims having to live in friends’ garages emerged, as did many tragic reports of suicides.

To many, it seems incredible that so many people (actual numbers differ but are rumoured to be over 30 000 in 146 countries) were duped into investing such vast sums of money into a largely unproven scheme. “Surely they should have read the tea leaves, and seen the writing on the wall…?” we ask, incredulously.

But Steynberg is not a stupid man.

He presented MTI as a credible, trustworthy solution to all your money worries.

MTI’s own website content says things like, “We take all the hassle out of Forex trading by doing it all for you,” “Johann’s vision for the company is to provide investors with a passive and sustainable form of income,” and “MTI offers a reasonable daily profit; the company does not overstate the potential or make unrealistic promises.”

There were also slick, smooth, and beautifully produced promo videos that lured millions of people in with their promise of effortless profits. “Sit back, relax, and watch your Bitcoin grow,” and “MTI is the investor’s game changer,” are just two of the gems from one of their videos.

It all sounded so reasonable, honest and safe.

And of course, so darn profitable.

Which is what makes it even more tragic when you read the comments people left below these videos on YouTube (made between two and three years ago):

“I am loving MTI more. Finding that the BINARY BONUS is PERPETUAL, and NOT one time only. More power to MTI. Hope more people will find MTI. Great opportunity. Yay!”

And

“I really like this Company; MTI truly seems to be doing EVERYTHING the right way – to protect their investors and establish this company on a solid foundation for the long haul. I too am delighted to have found MTI!”

We know that hindsight is 20/20 vision, and it’s easy to say investors should have known better. But that smug wisdom is scant consolation for the people whose lives have been forever shattered by Steynberg’s scheme.

In the light of the recent judgements in the US and Western Cape, what does the future hold for these, and all the other people caught up in the MTI nightmare? Is there any hope of ever recovering any of their lost millions?

The experts say no. But others say there might be a thin ray of hope.

Let’s not hold our collective breath.

The CFTC has warned that the restitution order, while outwardly encouraging, may not actually result in the recovery of the stolen Bitcoin as “wrongdoers may not have sufficient funds or assets.”

In addition, there remains the not-insignificant technicality that Johann Steynberg is currently incarcerated in a Brazilian jail, where he’s been since December 2021 when he was arrested on an Interpol warrant for attempting to use a fake passport. He remains a fugitive from South African law enforcement.

So, while the judgements against him and MTI are undoubtedly precedent-setting, whether they will prove to make any tangible difference in the lives of his victims remains to be seen.