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The liquidators of Mirror Trading International have arranged that they receive a R120-million payment out of the defunct pyramid scheme’s estate before any victims have received a cent.
Lawyers and advocates who worked on the liquidation have been paid over R64 million, a liquidation and distribution account lodged with the Master’s Office in Cape Town shows.
Mirror Trading International (MTI) was a Bitcoin-based network marketing scam that began in South Africa and drew in members worldwide.
MTI made headlines in September 2020 when a group calling itself Anonymous ZA exploited vulnerabilities in the scheme’s poorly-coded website.
Together with a MyBroadband investigative journalist and community members, the group exposed the inner workings of MTI.
In mid-December 2020, MTI CEO Johann Steynberg disappeared while travelling in Brazil, and MTI collapsed. Liquidation proceedings were instituted shortly after that.
Steynberg was arrested in Brazil almost exactly a year later for allegedly showing false identity documents to police.
By sheer stroke of luck, and with the help of the Financial Sector Conduct Authority, the liquidators recovered 1,281 bitcoins that MTI’s former brokerage, FXChoice, had frozen.
According to FXChoice, it had frozen the funds in June 2020 after detecting suspicious activity on the account and conducting an internal investigation.
The first official warning about MTI, issued by the Texas Securities Commission, only came out about a month later.
Thanks to FXChoice’s swift action and the timing of MTI’s liquidation, the liquidators banked almost R1.1 billion by selling the bitcoins on Luno.
According to the L&D account, the liquidators negotiated Luno down to a 1% trading fee, and the platform earned a cool R10.6 million off of the transactions.
Besides Luno’s commission, the legal fees, and liquidators’ take, the L&D contains proof of payment to the South African Revenue Service (SARS) for over R283 million to settle a dispute over unpaid taxes.
It also makes provision for another R29.6 million to SARS in income taxes, calculated at a rate of 8%.
The joint liquidators issued a notice on 13 October that they had filed their first L&D account.
It was available for inspection for 14 days at the Cape Town Master’s Office and the Stellenbosch Magistrate.
MyBroadband contacted the liquidators twice to request a copy, but they did not respond.
A reader in the Cape eventually visited the Master’s Office and provided a detailed report of the document’s contents. They had initially gone to the Stellenbosch Magistrate, but the person with access to the papers was either sick or on leave.
The following table summarises the totals paid to law firms, advocates, and investigators working on the MTI case.
| Legal firm / Advocate | Purpose | Amount |
|---|---|---|
| Vezi de Beer | Lodging and defending liquidation | R588,061.11 |
| Coombe | Interrogations | R7,811,484.09 |
| Mostert & Bosman | Various legal costs | R24,129,559.08 |
| Strydom, Rabie, Heijstek & Faul | Various legal costs | R24,787,165.00 |
| Tingtingers Inc. | Various legal costs | R801,106.23 |
| Investrust | Court proceedings & suspense account | R184,032.83 |
| Adv SJ van Rensburg | Court proceedings | R389,880.00 |
| Schabort & Potgieter Inc | Various legal costs | R3,544,857.16 |
| Honey Attorneys | “Legal costs” | R1,696,292.45 |
| Investigators/forensics | ||
| The Computer Guyz | Crypto investigation services | R13,667,553.35 |
| Adv Vaughn Victor | Interrogations and crypto investigation | R5,966,003.67 |
| Liquidators Fees | R120,438,500.44 | |
The L&D includes justifications for the fees paid to several law firms and individuals.
It said Mostert & Bosman were involved in interrogations conducted as part of section 417 and section 418 enquires, which helped obtain the necessary proof to have MTI declared unlawful.
“The interrogations further assisted to identify unlawful misappropriation of bitcoin by the management/perpetrators,” the liquidators stated.
“The interrogations were necessary to identify, verify and confirm section 26 and 29 claims against investors who have benefitted from the illegal scheme in respect of payments which were made to them.”
The liquidators said the same justification applied to Strydom Rabie Heijstek & Faul.
Regarding Advocate Vaughn Victor, the liquidators stated he was instrumental in recovering the 1,200 bitcoins from FX Choice in March 2021.
“During the inquiries, Adv Victor investigated and conducted the inquiries on witnesses to establish the claims against each witness, he also prepared all bundles of the inquiries and forwarded to the attorneys of record,” they stated.
“Adv Victor as a crypto specialist was instrumental in numerous court proceedings of which falls outside of the inquiries.”
The liquidators said he was also directly involved in the section 424 summons.
Victor, who is also a liquidator on a case involving Louis Liebenberg, was recently the subject of controversy when a video allegedly showing him torturing an elderly woman for information related to a farm murder surfaced online.
He has denied the allegations against him and said it’s part of a smear campaign.
The Western Cape High Court has declared MTI an unlawful scheme.
In her ruling, acting High Court Judge Alma de Wet called it a pyramid and a Ponzi-type scheme.
The exact size of MTI has been a moving target. Previous court documents estimated that 29,421 bitcoins flowed through the scheme.
Sources with knowledge of the case told MyBroadband the actual number is closer to 46,000 bitcoins.
Most recently, Geldsake (Afrikaans wordplay “money-matters” or “money-business”) reported that around 39,000 bitcoins had been deposited into the scheme and 32,000 withdrawn — leaving a difference of roughly 7,000 bitcoin.
Regardless of which number you use, MTI is the biggest pyramid or Ponzi-like scheme in South Africa’s history.
Using the current bitcoin price of around R650,000, even the lower estimate values MTI at R19.1 billion.
The infamous Krion Ponzi scheme was valued at around R1.5 billion in 2009, while Travel Ventures International (TVI) was reportedly a R4 billion pyramid scheme.
The value of Africrypt is disputed, but the most realistic estimates valued the scheme at between R200 million and R1 billion.
MTI’s liquidators have yet to pay the scheme’s over 7,000 proven creditors any portion of their claims.
However, they recently told MyBroadband that they are waiting for a declaratory court order on how they must handle claims.
Based on the L&D account, just under R635 million remains for claims and further legal fees.
It is understood the liquidators will only receive more fees if they recover additional funds from MTI’s “net winners”.
Now read: Liquidators of South Africa’s biggest pyramid scheme in history strike deal with US over R33-billion claim
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