Mastermind of South Africa’s biggest pyramid scheme in history ordered to pay R63.6 billion

3 years ago 1

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Mirror Trading International (MTI) CEO Johann Steynberg has been ordered to pay close to $3.5 billion (R63.6 billion) in restitution and penalties in the United States.

The Commodity Futures Trading Commission announced the ruling late on Thursday.

“Judge Lee Yeakel of the US District Court for the Western District of Texas entered an order of default judgment and permanent injunction against Cornelius Johannes Steynberg of Stellenbosch, Western Cape, Republic of South Africa,” it said.

“The order requires Steynberg to pay $1,733,838,372 in restitution to defrauded victims and a $1,733,838,372 civil monetary penalty, which is the highest civil monetary penalty ordered in any CFTC case.”

This action is also the largest fraudulent scheme involving Bitcoin charged in any CFTC case, the regulator stated.

MTI was a Bitcoin-based network marketing scam that began in South Africa and drew in members worldwide.

The Western Cape High Court declared it an unlawful scheme in a ruling handed down on Wednesday.

Acting High Court Judge Alma de Wet called it a pyramid and a Ponzi-type scheme in her ruling.

MTI promised to grow members’ Bitcoin with monthly yields averaging 10%.

Members could also obtain substantial bonuses by recruiting more people into the scheme.

Sources with knowledge of MTI’s liquidation have told MyBroadband that over 46,000 bitcoin flowed through the scheme.

Using the current bitcoin price of R554,000, that values the pyramid scheme at nearly R25.5 billion.

According to the liquidators’ court papers, when MTI imploded, there was supposed to be 22,222.548 bitcoin in its accounts — around R12.3 billion at current valuations.

This makes it South Africa’s biggest pyramid or Ponzi scheme in history.

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.

Chainalysis named MTI the biggest cryptocurrency scam of 2020.

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, Steynberg disappeared while travelling in Brazil, and MTI collapsed. Liquidation proceedings were instituted shortly after that.

Steynberg was arrested in Brazil on 29 December 2021 — almost exactly a year after he first went missing.

The Texas court ruling stems from a complaint the CFTC laid on 30 June 2022 against MTI and Steynberg.

Had the CFTC’s original application been successful, it could potentially have seized all of the money currently in the MTI estate.

However, MTI’s liquidators applied for the South African liquidation to be recognized as the “foreign main proceeding” under the US bankruptcy code.

Their application was granted to liquidator Chavonnes Badenhorst St Clair Cooper on 18 March 2023.

Therefore, it is noteworthy that the CFTC only obtained the $3.5 billion restitution and penalty order against Steynberg, not the estate of MTI.

The CFTC said its litigation continues against MTI.

It is unclear how the CFTC hopes to extract the money out of Steynberg, as he still appears to be detained in a Brazilian prison.

The CFTC cautioned victims that restitution orders might not recover lost money because the wrongdoers may not have sufficient funds or assets.

“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 (forex) transactions, fraud by an associated person of a commodity pool operator (CPO), registration violations, and failure to comply with CPO regulations,” the CFTC stated.

“Additionally, under the order, Steynberg is permanently enjoined from engaging in conduct that violates the Commodity Exchange Act (CEA), as charged, registering with the CFTC, and trading in any CFTC-regulated markets.”

The CFTC thanked the South African Financial Sector Conduct Authority, the Financial Services Commission of Belize, the Texas State Securities Board, the Alabama Securities Commission, the North Carolina Secretary of State, Securities Division, and the Mississippi Secretary of State, Securities Division, for their help in the case.

The CFTC has not responded to MyBroadband’s requests for comment on the case.