R273 million payday for lawyers linked to South Africa’s biggest pyramid scheme

Of the nearly R1.1 billion that was available in the Mirror Trading International estate to repay victims of the scam, only R637 million remains.

This is according to court documents, including an April 2024 bank statement, filed in response to an attempt to convert the liquidation into a business rescue.

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.

The court documents state that 39,193.3 bitcoins were deposited into the scam. They cite a database the liquidators obtained from Maxtra Technologies, the Indian company that developed and hosted the MTI website.

Even using the much lower price of R500,000 per bitcoin at the time of the scheme’s collapse, MTI would be an almost R19.6 billion scam.

This is much larger than other pyramid and Ponzi schemes that have operated in South Africa, such as Krion, Travel Ventures International, BHI Trust, and Africrypt.

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.

Globally, financial regulators had also begun issuing warnings against MTI, including South Africa’s own Financial Sector Conduct Authority, which orchestrated a dawn raid of its offices.

The scheme collapsed in December 2020 after its founder and CEO, Johann Steynberg, disappeared while travelling in Brazil.

Steynberg was arrested in Brazil almost exactly a year later for using false identity documents.

He was found guilty, but his sentence commuted to a roughly R595,000 fine. He was also remanded into custody and eventually transferred to house arrest pending his extradition hearing.

Last month, a Brazilian news outlet reported that Steynberg had died after suffering a massive bilateral pulmonary thromboembolism.

Shortly after Steynberg’s initial disappearance, liquidation proceedings were instituted against MTI.

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, the funds were frozen in June 2020 after it detected suspicious activity and conducted an internal investigation on the account.

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 secured over a billion rands for the estate by selling the bitcoins.

The first liquidation and distribution account revealed that the liquidators banked R1,057,932,714 from selling the cryptocurrency.

It also revealed that the liquidators had collected another nearly R15.8 million from “net winners”.

These winners were scheme participants who had withdrawn much more from MTI than they had deposited.

However, recently filed court documents indicate that the liquidators have spent a substantial chunk of this money.

Just over R637 million remains in the estate’s accounts, including interest earned from Absa and Standard Bank on the deposits.

Of the money spent, R283 million was a transfer to SARS to settle a tax claim against the estate.

The liquidators have also pocketed their first fees to the tune of R139 million.

Factoring in all the interest earned, SARS’ claim, and setting aside the liquidators’ fees, they have spent over R144 million on legal fees and other costs.

The legal fees include hundreds of summonses issued to every MTI member in South Africa who withdrew funds from the scheme within a certain period.

The liquidators’ attorneys also issued 187 letters of demand in the United States, followed by 149 adversary complaints and an omnibus motion in the state of Florida.

They are also pursuing net winners of the scheme elsewhere in the world, including Canada, Belgium, the UK, Namibia, Australia, Sweden, Botswana, and Germany.

MyBroadband asked the liquidators whether going after people in these countries would bring in more money than they spent on the legal action.

The liquidators did not respond by publication.