FBI jumps into bitcoin probe

The US Federal Bureau of Investigation (FBI) has thrown its weight behind the international probe into Mirror
Trading International (MTI), the bitcoin investment scheme which promised returns as high as 10% a month.

The scheme attracted a reported 23 000 bitcoin from around the world – worth about R11 billion at current prices.

According to legal adviser Hendrik van Staden, speaking on a recent webinar with US lawyers on recent developments, the FBI has started monitoring the scheme, which stopped paying out members’ requests for withdrawals in early December, resulting in the Cape High Court placing MTI under provisional liquidation just before Christmas.

This was confirmed by members of the Recovery Action Group (RAG), which represents MTI investors’ interests.

“The FBI is obliged to get involved wherever suspected fraud using US dollars is involved,” said cybersecurity and crypto expert advocate Vaughn Victor.

“Because of the international nature of this investigation, there will be multiple law enforcement agencies from around the world getting involved.”

Though MTI claimed to have 280 000 members, research by Victor said the actual number was closer to 60 000, with
many of these members creating “downline” accounts to beef up numbers to benefit from the 10% commissions paid for introducing new members.

In financial terms, the largest volume of investments outside of SA are reckoned to have come from the UK and US.

Stuart Fraenkel, of US law firm Nelson & Fraenkel, said evidence was emerging that the bulk of US investors in MTI are based in California.

In recent months, Texas and Canada regulators sounded the alarm over MTI’s business practices.

It’s accused of making misleading claims about its returns, while the Quebec Financial Market Authority listed MTI as a company that solicits investors illegally.

SA’s Financial Sector Conduct Authority (FSCA) also issued a warning about MTI’s business practices.

Fraenkel said information from the Texas State Securities Board, working with the FBI, showed some of the “bad actors” within MTI are based in California and two are in bankruptcy.

“Authorities here [in the US] will be digging to see where did the bitcoin go, and there will be a claw-back provision.”

The investigation will require co-operation between legal authorities and law enforcement agencies in multiple jurisdictions to help track down bitcoin shipped by investors to MTI.

The picture is complicated by different national laws which could hamper the task of clawing back missing assets in different parts of the world.

Investigators will have to track down bitcoin from multiple wallets that may be well hidden, and return these assets to MTI control.

They’ll then have to be aggregated to see what’s left. Liquidators are likely to be appointed within the next couple of
days and can then start the legal process to freeze MTI’s assets.

They will then seek the cooperation of authorities worldwide to block the transfer of bitcoin belonging to investors.

Liquidators will ask the court for extended powers to assist in tracking and recovering assets internationally.

They’re also likely to convene a Section 417/418 inquiry under the Companies Act to interrogate MTI executives and leaders who profited from the scheme to assist in tracking down assets.

This article first appeared on Moneyweb and was republished with permission.

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