Apparently, MTI was trumpeting a return of 10% a month (although it’s hard to see how that took the highly volatile Bitcoin exchange rate into account). Photo: File

Words on Wealth: Huge losses on the cards for unsuspecting MTI investors

By Martin Hesse Dec 29, 2020

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The more I read about Mirror Trading International (MTI), the more doubtful I become that its investors will retrieve their money.

It is turning out to be one of South Africa’s biggest investment disasters.

Thousands of investors worldwide placed about 17 000 Bitcoin with MTI, according to investigators’ reports. At Bitcoin’s current high value (almost R380 000 for a single unit of the cryptocurrency at the time of writing), the total potential loss is about R6.5 billion.

All those Bitcoin have vanished, along with the chief executive of MTI, Johann Steynberg, who is “somewhere in Brazil”.

This puts MTI second, as far as I can ascertain, on South Africa’s long list of financial scandals: below the jaw-dropping R12.5 billion lost in Barry Tannenbaum’s pharmaceutical Ponzi scheme in 2009, but well above the R1.6 billion lost in the Fidentia scandal of 2007 and, more recently, the R2 billion which disappeared into the wormhole that was VBS bank.

Still vivid in our memory is the Ecsponent debacle of earlier this year, when R2.3 billion of preference shares with a “safe” regular return were converted to normal shares. The shares of the company, renamed Afristrat, were trading at about 7c at the time of the conversion. They currently trade on the JSE – to anyone willing to buy – at 1c.

I could go on: there were the notorious property syndications of a decade ago, such as Sharemax, still the subject of court cases and ombudsman determinations, and a multitude of smaller scams involving millions not billions, but which nonetheless succeeded in separating people, mostly pensioners with no other means of income, from their life savings.

It’s unlikely there are many pensioners among the MTI investors, however. I don’t think pensioners are big on Bitcoin, even those who know what it is. I would guess that most of the investors are younger working people who dabbled in Bitcoin and then used those Bitcoin to further dabble in MTI.

They must have known the risks. Bitcoin itself is risky. If you bought five years ago when Bitcoin was R6 000 and held on through the cryptocurrency’s ups and downs, you’d have made a fortune (a return of 6 233%). If you bought at the peak of the Bitcoin bubble in December 2017, and not panic-sold in the ensuing crash, you’d be up a more realistic 60%. But if you bought at R390 000 just a couple of days ago, you’d be R10 000 down on your investment.

Apparently, MTI was trumpeting a return of 10% a month (although it’s hard to see how that took the highly volatile Bitcoin exchange rate into account). Most scams advertise unrealistic “stable” returns. That should have been the first red flag.

Should the regulator – the Financial Sector Conduct Authority (FSCA) – have done more to warn investors? Should it have shut down the operation sooner? As in the Ecsponent case, I believe it could have done much more.

But the FSCA cannot be everywhere at once, keeping tabs on all the suspect investment operations out there. The nature of the internet is such that websites (and the operations behind them) can pop in and out of existence like subatomic particles in a particle accelerator.

So it’s up to you, the investor, to apply more caution. Beyond being extremely wary of advertised high returns, find out whether the operation is registered with the FSCA as a financial services provider and, if it is internet-based, establish the actual physical premises of the operation and speak to someone there. Also sound out a few people you trust, who have no financial interest in your investments, on whether a particular investment sounds like a good idea. An independent professional financial adviser, such as one with the Certified Financial Planner accreditation, should be able to guide you, but check for any conflicts of interest.

  • The Cape Town High Court has granted a provisional liquidation order against MTI. Luitingh and Associates in Cape Town is one of two law firms that lodged applications for liquidation. If you are trying to retrieve your investment, you urgently need to complete a requisition form, on www.mtiliquidation.co.za, to join the claim against any assets recovered.

PERSONAL FINANCE

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