Liquidators of the Mirror Trading International pyramid scheme have left victims and beneficiaries alike confused by how they are clawing back amounts withdrawn from the scheme before its collapse.
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.
MTI collapsed in December 2020 after its CEO, Johann Steynberg, disappeared while travelling in Brazil.
However, the writing had been on the wall for weeks before then, with several members reporting that withdrawals were not being processed or taking extremely long.
Steynberg resurfaced almost exactly a year later when he was arrested in Brazil for using a fake ID.
He reportedly died in April this year of a pulmonary thromboembolism while under house arrest, awaiting his extradition hearing.
Shortly after withdrawals stopped in December 2020, MTI was placed in provisional liquidation.
A final liquidation order was granted soon thereafter, and MTI was ultimately declared a pyramid and Ponzi-type scheme in April 2023.
In recent months, MTI’s liquidators have issued summonses to hundreds of South Africans who withdrew funds from the scam while it was still active.
The summons demands that members return all the bitcoin they withdrew from the scheme or pay back the cryptocurrency’s current rand value.
For some of the scam’s victims, this is a devastating blow.
If they bought 0.01 bitcoin for R1,670 on 1 July 2020, they would have to pay back the liquidators over R12,000 today.
However, there has been mixed messaging regarding the amounts people need to repay.
The liquidators obtained an order from the Cape Town High Court this year permitting them to serve summons electronically, requiring them to place a notice in the press.
This notice stated that the liquidators claimed the return of the profits members extracted from the scheme.
The exact wording was: “In those summonses the liquidators claim return, alternatively payment of the value, of the bitcoin so withdrawn in excess of the bitcoin invested.”
This seems at odds with the actual demands of the summonses, which call for the return of all funds withdrawn.
Additionally, there is confusion about how the value of bitcoins deposited into and withdrawn from MTI should be converted to rand.
The summonses state that the exchange rate at the time of the legal notice must be used.
However, a declaratory order obtained by the liquidators last year states that the bitcoin exchange rate at the date of deposit into or withdrawal from the scheme should be used.
The order, issued by Acting Justice Alan Maher on 9 November 2023, also appears to say that members only need to return their profits to the MTI estate.
However, the judgement then seemingly overrides those earlier clauses with the following wording.
“The Liquidators may pursue investors in respect of all transfers made, including in respect of the profits, in terms of section 26 and 29 or 30 and/or 31 of the Insolvency Act, when and where the circ*mstances permit.”
The investor can then lodge a claim for their initial investment.
This suggests that the liquidators may employ the harsher stipulations of the Insolvency Act if they choose to, including calculating the rand value of bitcoin differently and claiming back all withdrawals.
When previously asked why they were clawing back all withdrawals rather than just the profits, the liquidators said this was to ensure fairness for all victims.
“The effect of Section 29 of the Insolvency Act is often viewed by innocent investors as extremely harsh and unreasonable,” said Herman Bester, one of MTI’s liquidators.
Bester explained that the legislation was designed to balance the interests of creditors who didn’t make any withdrawals and lost everything, as well as those who withdrew some or all of their funds from the scheme before it collapsed.
In addition to clawing back funds from South African members of the scheme, the liquidators are pursuing hundreds of claims overseas too.
This includes roughly 200 complaints in the United States, 31 claims in Canada, 58 in the UK, 244 in Belgium, another 244 in Namibia, at least 129 in Australia, 37 in Sweden, and over 55 in Germany.
MyBroadband asked MTI’s liquidators for comment regarding the contradictory wording between its electronic notice and actual summonses, but they did not respond by publication.
