MTI CEO disappears with over R5 billion in investors’ bitcoin

Where’s Johann? Panama, Brazil, South America?

Speculation is running rife as to the whereabouts of bitcoin trading group Mirror Trading International (MTI) founder and chief executive officer (CEO) Johann Steynberg who apparently left the country on 3 December 2020 and hasn’t been seen since.

According to a statement released by MTI management on 19 December, he remained in contact with them until about a week ago and then seemingly went off the grid and has since been uncontactable.

Several months ago, the Financial Sector Conduct Authority (FSCA) issued a warning to the public to steer clear of MTI, which promised returns of up to 10% a month using a computerised trading algorithm which was claimed to have lost only one day out of 200.

To participate in the scheme, members had to buy bitcoin and ship it to a wallet apparently controlled by Steynberg.

Despite the adverse publicity, MTI’s membership seems to have grown. Last week MTI marketing executive Cheri Marks told Moneyweb the company had 280,000 members. In October, the number of bitcoin reportedly under MTI control was 17,000, which would have a current value of about R5.6 billion.

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On Monday, MTI’s legal representative Ulrich Roux & Associates withdrew as attorneys of record for the group. In a letter outlining the reasons for the withdrawal, the law firm states: “It has recently come to our attention that the CEO of Mirror Trading International, Mr Johann Steynberg, is no longer in South Africa, and that the remaining members of the MTI management team have no way of contacting Steynberg. In addition to this, we have been informed that MTI members are not receiving their withdrawals, as they have in the past.”

The letter goes on to say that Ulrich Roux & Associates has been in contact with the FSCA “and will continue to provide assistance and cooperation to the FSCA pertaining to their ongoing investigation into MTI, subject to the parameters of legally privileged information.”

The law firm says it cannot provide any clarity as to the investments of MTI members, as this was not part of its mandate “and we have no knowledge pertaining to same”.

The firm was engaged by MTI in April 2020 with a mandate to assist in legal compliance in terms of the Companies Act; legal assistance in the drafting of contracts and general litigation; and legal representation relating to correspondence received and interaction with the FSCA.

Members concerned

Social media was ablaze with comments on the latest developments, and members are understandably concerned over the fate of their investments.

Brandon Topham, head of investigations and enforcement at the FSCA, says he has been inundated with queries from MTI investors from as far afield as the Netherlands, asking for clarity on the state of the investigation and the likelihood of recovering any of their investment.

“The problem that we have, and which we alerted the public to several months ago, is that once you surrender your bitcoin to someone else, it is out of your control. I only wish people had heeded our warnings to get their money out several months ago.”

Things started to go pear-shaped for MTI in October this year when the FSCA launched a search and seizure raid on the offices of MTI and the homes of some of its executives, grabbing several phones and electronic devices.

As Moneyweb reported last week, the FSCA has opened a criminal case against MTI and provided further details on its ongoing investigation into the company. “The authority [FSCA] believes that MTI and its senior management are conducting an illegal operation, misleading clients and have contravened several laws,” says the FSCA statement.

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MTI maintained throughout that it did not fall under the jurisdiction of the FSCA and did not need a financial services provider licence. The FSCA said this was untrue as the bitcoin allegedly being traded by the company was in the form of derivatives, which placed it under the authority’s jurisdiction. “We have found no evidence that any crypto trading is being conducted as communicated with members of MTI,” says the FSCA statement issued last week.

MTI originally claimed to be trading forex through a Belize-based broker called FXChoice, though the FSCA investigation found that this accounted for a relatively small amount of bitcoin (1846 bitcoin, which is slightly more than 10% of the total bitcoin claimed to be under MTI’s control). Roughly 30% of the capital at FXChoice was lost over a period of just over four months this year. When clients asked for statements of account, they were provided with demo rather than actual trading accounts, issued by MTI.

MTI then says it switched to trading bitcoin rather than forex within days, and members’ statements show the daily returns kept on coming as before, a track record many believe was suspect, if not impossible.

FXChoice froze the remainder of the crypto assets linked to MTI, which then purportedly started trading through a different broker, Trade300. The only evidence of this broker existing was a website which was “under maintenance” and linked to the name Joe Steyn, a known alias of Johann Steynberg, according to the FSCA.

MTI’s astonishing success in building a network of hundreds of thousands of investors was due in no small part to its referral marketing scheme, where members who introduce new clients earned generous bonuses.

Several SA crypto exchanges have had to deal with the MTI phenomenon. The only way to invest in MTI is with bitcoin, rather than cash. Lured by the promise of returns as high as 10% a month, there are stories of retirees cashing out pension funds to invest in MTI. To acquire bitcoin, they would have to do so on one of the SA crypto exchanges, which several months ago started to quiz new customers planning on acquiring crypto for the sole purpose of investing in MTI. The exchanges told Moneyweb they tried to alert the public to the potential dangers of a scheme which looked too good to be true.

Several MTI members who wrote to Moneyweb believe the FSCA is on an unwarranted vendetta against MTI and cryptos generally.

To which Topham replies: “There’s an old saying that if something appears too good to be true, it probably is.”

MTI members brandished daily report statements showing gains of 0.2% to more than 1% a day. The FSCA believes these statements are nothing more than “shadow” or fake accounts intended to keep members happy. It has been able to track the whereabouts of some of the bitcoin wallets controlled by MTI, but not all.

The irony is that those who bought and held bitcoin in their own wallets would have made a whopping 200% in 2020, without having to hand their bitcoin over for anyone to manage on their behalf.

In recent weeks, MTI members reported difficulties in making withdrawals. MTI said this was in part due to the FSCA raid, which resulted in the broker restricting withdrawal volumes, and various technical problems.

Moneyweb was unable to reach MTI for comment at the time of publication.

This article originally appeared on Moneyweb and has been republished with permission.