The Financial Sector Conduct Authority (FSCA) says it has opened a criminal case against Mirror Trading International (MTI) and on Thursday issued a statement providing details of its investigation into the company, which it says is nearing completion.
Last month the FSCA conducted a search and seizure raid on the offices of MTI and the homes of some of its executives, after previously warning the public against investing in the company which has been promoting its bitcoin investment scheme with returns of up to 10% a month.
Despite the FSCA warnings, the number of MTI customers appears to be growing. Marketing executive Cheri Marks told Moneyweb that the company now had 280 000 customers worldwide.
“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.
Marks said she was not aware of any criminal case against MTI.
Head of investigations at the FSCA, Brandon Topham, says the case was opened on November 12 in Stellenbosch (where MTI’s head office is located) under case number 245/11/2020.
The FSCA maintains that MTI is trading illegally and requires a financial services provider licence – which it does not have. MTI argues that its activities fall outside the jurisdiction of the FSCA, though it would be happy to comply with proposed regulations if and when these are introduced.
MTI was originally trading forex through an offshore broker, then switched to trading in bitcoin when its forex activities were halted.
The company claims to have generated positive returns for more than 200 days, with only one day losing – notwithstanding the switch from forex to bitcoin trading.
The FSCA statement provides some background on MTI and its trading activities.
“During October 2020, after the FSCA informed MTI that it was an conducting illegal unregistered financial services business, MTI claimed that it changed its trading activities to trade in derivative instruments based on crypto currency [bitcoin], so that it no longer fell within the jurisdiction of the FSCA, and that it no longer required an FSP [financial services provider] licence. This is also incorrect as the submissions received from Steynberg [MTI CEO Johann Steynberg] revealed that the crypto was alleged to be traded in the form of a derivative product, which would have required registration with the FSCA as well. We have found no evidence that any crypto trading is being conducted as communicated with members of MTI.
“MTI, Steynberg, and Cheri Marks claim that the trading activities of MTI were from FXChoice to Trade300, transferring all the clients’ crypto assets from FXChoice to Trade300.
“According to Steynberg, Trade300 is another online trading platform. At Trade300 MTI experienced the same extraordinary profits utilising the bot – but at this stage trading in crypto derivatives.
“Steynberg stated under oath and repeatedly in the press that the bot [computer algorithm] trading averaged a return of 10% per month, and that MTI has never had a negative profit trading day, but for one exception. Marks also repeatedly confirmed the trading successes on social media.”
The evidence uncovered by the investigation
The FSCA says it obtained evidence from FXChoice, a Belize-registered online trading platform, that is in complete contradiction with the claims of Steynberg and Marks.
“According to FXChoice they 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. FXChoice confirmed that MTI put in 1846.72 Bitcoin from 29 January 2020 until 3 June 2020 and made a loss of 566.68 Bitcoin, an approximate capital loss of 30%.”
The FSCA says it attempted to track down Trade300 to obtain a statement and trading details from it to verify the version of MTI. MTI did not provide any useful details that assisted the FSCA.
Does Trade300 exist?
The FSCA also followed all possible links on the internet to establish whether Trade300 existed.
It could only find one reference to Trade300, being the website of Trade300. However, the website 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.
The FSCA obtained search and seizure warrants and executed them at the homes of Steynberg and Marks, and the offices of MTI. On the desktop computer of Steynberg the investigation team found evidence relating to Trade300. It would therefore appear that Trade 300 is linked to Steynberg.
As a further effort to verify the evidence of MTI, Steynberg and Marks, the FSCA requested information from MTI about the transfer of clients’ assets from FXChoice to Trade300. MTI, in support of its assertion, 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 on 21 July, 22 July and 24 July 2020 respectively.
“The FSCA found that no withdrawal of bitcoin by MTI from FXChoice occurred in July 2020. The last withdrawal of bitcoin by MTI from FXChoice was conducted in August 2019. Further, FXChoice confirmed that none of the eight sending wallets are related to FXChoice and that FXChoice had neither received deposits from nor sent any payments to any of the eight bitcoin wallets,” says the FSCA statement.
“The transfers were made from wallets with transaction activities which bear no resemblance to the purported activities of MTI.
“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 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.
“In the last few days, we received complaints that investors were unable to redeem their investments.
“The investigation is ongoing, and a criminal case has been opened by the FSCA with the South African Police Service.”
Asked to respond, Marks says this is again tactics from the FSCA to sow discord and panic among the MTI membership.
“They are still in the very early stages of the investigation by their own admission. They do not understand our business and don’t want to understand it. Who are they trying to protect? Is it the banking institutions, themselves, or [is it] MTI members?
“MTI is making a difference in people’s lives that they [the FSCA] cannot understand, particularly during these tough economic times.”
MTI said its legal team would provide a more complete response in due course. The story will be updated as and when we receive this.
Listen to Ciaran Ryan’s interview with Brandon Topham, head of enforcement at the FSCA: