The Financial Sector Conduct Authority (FSCA) reports that its investigation into Bitcoin investment platform Mirror Trading International (MTI), which is “nearly complete”, has revealed that it “has no significant store” of investors’ assets invested in any trading platform, with the implication that the bulk of the investors’ Bitcoin assets were never invested on their behalf and may simply have been stolen.
The FSCA says it believes that MTI and its senior management (chief executive Cornelius Johannes Steynberg, Clynton Hugh Marks and Cheri Marks) “are conducting an illegal operation, misleading clients and have contravened several laws” and has referred the case to the police.
Bitcoin trader
MTI started operating in April 2019. According to the FSCA, “members of the public were invited to register on the MTI website (www.mirrortradinginternational.co.za and www.mymticlub.com) and move their Bitcoin from their Bitcoin wallets to MTI Bitcoin wallets. Steynberg was in full control of these MTI Bitcoin wallets. From the MTI Bitcoin wallet, the Bitcoin were transferred to MTI’s forex platform ‘broker of choice’ by the name of FXChoice.
“Steynberg testified that, from April 2019 to July 2019, member trading accounts were linked to a professional trader appointed by MTI through a multi account manager arrangement. Trading was conducted in derivative instruments based on forex pairs.
“However, according to Steynberg, MTI experienced substantial losses (of up to 80%) and, as a result, MTI requested its members to delink their respective FXChoice accounts from the multi account manager account and move their Bitcoin to a pooled account.”
The FSCA says that Steynberg and Cheri Marks testified that all the clients’ crypto assets were transferred from FXChoice to Trade300, another on-line trading platform. “Steynberg stated under oath and repeatedly in the press that the trading averaged a return of 10% per month, and that MTI had never had a negative profit trading day, but for one exception. Marks also repeatedly confirmed the trading successes on social media.”
In October this year, after the FSCA warned MTI that it was acting illegally as an unregistered operation, MTI claimed that because it traded in derivative instruments based on cryptocurrency, it did not fall under the jurisdiction of the FSCA and did not require a financial services provider licence.
The FSCA says this is incorrect – investment platforms dealing in derivative products are required to be registered. On top of that, the FSCA “found no evidence that any crypto trading had taken place, as communicated with members of MTI”.
Investigation
The FSCA says evidence it obtained from FXChoice, a Belize registered online trading platform, completely contradicts the claims of Steynberg and Marks.
“FXChoice said it received queries from clients of MTI and, in the process, the clients provided FXChoice with trading statements. The source of the trading statements was MTI. These trading statements were based on demo trading accounts and not actual trades. As a result, FXChoice froze the balance of the crypto assets linked to MTI on the FXChoice platform.
“However, the total frozen crypto assets on FXChoice is a negligible amount, taking into account the total assets that MTI claimed it invested on behalf of its clients,” the FSCA says.
The FSCA says it then attempted to track down Trade300 to obtain a statement and trading details, to verify MTI’s version of events. The authority says it followed all possible links on the internet to establish whether Trade300 existed. It could only find the Trade300 website, which was and still is “under maintenance”, and the only reference linked to the website is the name of “Joe Steyn”, a known alias of Steynberg.
Search and seizure
The FSCA executed search and seizure operations at the homes of Steynberg and Marks and at the offices of MTI. On Steynberg’s desktop computer of Steynberg the investigation team found evidence relating to Trade300. “It would therefore appear that Trade300 is linked to Steynberg,” the FSCA says.
As a further effort to verify the evidence of Steynberg and Marks, the FSCA asked MTI about the transfer of clients’ assets from FXChoice to Trade300. “MTI purported to provide proof of the transfer in the form of Bitcoin wallets, stating that MTI transferred 16 444 Bitcoin from FXChoice to Trade300 in four instalments in July 2020,” the FSCA says.
However, the authority found that no such transfer took place, concluding: “We have found no evidence of any significant store of crypto assets on any trading platform and that most crypto balances appear in the name and under the control of Steynberg. The amount of such balances is well below the advertised balance on the MTI trading platform as being due to investors of MTI.”
It said that it had recently received complaints that investors were unable to redeem their investments.
A criminal case has been opened by the FSCA with the South African Police Services.
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