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MTI was by far 2020’s biggest investment scam – Chainalysis

Helped itself to R8.6bn worth of bitcoin belonging to its ‘investors’.
Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam. Image: Dado Ruvic, Reuters

It’s official: Mirror Trading International (MTI) was the world’s biggest crypto scam of 2020, having roped in $588 million (R8.6 billion) worth of bitcoin across 470 000 transactions, according to the recently released 2021 Crypto Crime Report by Chainalysis.

The number of victims likely runs into hundreds of thousands, says the blockchain analysis company.

However, 2020 wasn’t quite as bad as 2019 for crypto scams: in 2019, Ponzi schemes took in nearly $7 billion worth of cryptocurrency, against just under $2.7 billion in 2020.

The biggest scam of 2019 was PlusToken, which sucked up $3 billion worth of cryptocurrency from millions of victims – most of them in Asia. Chinese authorities have since arrested 109 individuals associated with the scam and prosecuted six of the most prominent.

Badge of infamy

The dubious distinction for 2020 goes to MTI, SA’s own home-bred crypto scam which was “by far” the biggest in the world in 2020, says the report.

The fact that the value of loss from crypto Ponzi schemes declined in 2020 suggests that “cryptocurrency users and the general public have grown more suspicious of such scams, or that potential Ponzi scheme operators have been scared off by the punishments doled out to the PlusToken operators,” says the report.

Most scams in 2020 were smaller in scale, and tended not to follow the typical Ponzi route of paying out fake proceeds to early investors.

Source: Chainalysis 2021 Crypto Crime Report

MTI, which was placed in provisional liquidation late last year, attracted tens of thousands of investors from around the world by offering returns of up to 10% a month.

Read:
FSCA investigating Mirror Trading International (Aug 2020)
Get-rich-quick scheme pulls a crowd, despite regulators calling time-out (Aug 2020)

“MTI presents itself as a passive income source. According to its website, users simply deposit a minimum of $100 worth of bitcoin, and MTI promises to grow it using an [artificial intelligence] AI-powered foreign exchange trading software,” says the report, which analyses web traffic to the company’s web site as well as transactions flows.

“The site indicates that customers can achieve consistent daily returns of 0.5%, which would translate to yearly gains of 500%,” it adds.

“Algorithmic trading is a common premise for many cryptocurrency investment scams.”

MTI had offices in Stellenbosch and Johannesburg. More than half its web traffic comes from South Africa, with a substantial portion of the balance coming from the US, UK, Canada and Mexico.

“We assume from this that most MTI victims hail from these countries in similar proportions as well. MTI has been actively receiving bitcoin from ‘customers’ since June 2018 and even has 150 employees listed on its LinkedIn company page.”

Warnings

However, despite these airs of legitimacy, Google searches reveal that people have been rightly speculating that the company is a scam for most of its existence. In August 2020, the Financial Sector Conduct Authority (FSCA) issued a warning about MTI and urged investors to ask for their money back. There were almost multiple warnings about the scam in the press.

In December last year the FSCA filed charges against MTI after its investigation found that the company falsified trade statements, didn’t declare losses and committed other acts of fraud to deceive the market, says Chainalysis.

“The investigation also found that MTI had over 16 000 Bitcoin of claimed customer investment funds unaccounted for. MTI claimed to have transferred those funds to a new FX trading platform after its old platform banned MTI due to its scamming reputation, but the new platform says these funds were never deposited.

“Since those charges were filed, MTI customers have complained that they can no longer access or withdraw funds they’ve deposited to the platform, and MTI CEO Johann Steynberg has fled SA.”

Investigation

Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam.

“MTI Club has received $589 million worth of bitcoin across more than 470 000 transactions, primarily from exchanges, but also from self-hosted wallets. MTI has also sent and received significant funds to and from a popular, Bitcoin-friendly FX trading platform, as we show in the Reactor graph above,” according to the report.

“Perhaps most interesting is MTI Club’s apparent usage of a popular cryptocurrency gambling service as a money laundering and cash-out mechanism,” it says.

“The platform is the biggest risky destination of MTI funds by volume, having received $39 million worth of cryptocurrency from the scam in 2020.

“Cryptocurrency observer and venture capitalist Dovey Wan remarked that this is becoming a common money laundering technique for many cybercriminals who use cryptocurrency, as gambling platforms can be used similarly to mixers to obscure the origins and flows of illicitly-obtained funds.”

Source: Chainalysis 2021 Crypto Crime Report

The report shows scammers are disproportionately likely to send funds to gambling platforms rather than other services frequently used for money laundering.

Source: Chainalysis 2021 Crypto Crime Report

“Mirror Trading International is another example of why the industry must spread the word that algorithmic trading platforms promising unrealistically high returns are nearly always scams,” states the report.

“When cryptocurrency exchanges and other services learn of these scams and receive their cryptocurrency addresses, they should discourage users from sending funds to those addresses or at least warn them that financial losses are highly likely. In addition, exchanges, gambling platforms, and other services that these scams use to launder funds should consider blocking incoming transactions from businesses that relevant government bodies label as scams or potential scams, as removing the ability to convert funds to cash makes it more difficult for scams to operate.”

The Chainalysis report also warns of increasing scams involving decentralised finance (DeFi) platforms.

Source: Chainalysis 2021 Crypto Crime Report

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Well done Cheri Marks and Co in beating all international Bitcoin scam competitors in 2020 , showing the world that South Africa is able to compete successfully in the world of fraud.

Hahaha, Cheri did something that Bafana Bafana couldn’t, her and her Hubby beat Nigeria into second place, well done the Marks’s!!!:):)

Maybe should make a documentary “Chasing the Coin”. World Champions what can we say.

What role did their Bankers, Auditors and Lawyers play from day one when this was set up?

Auditors you say? …bhah!

Am still waiting for MTI’s Steynberg to supply us with audited financial statements. But no…people invest en masse, fear of losing out. And the nominated winners are: Steynberg, Marks & company

Guess they all must have been helpful, in their own inimitable ways, for a small cut.

China has already charged prominent people? What’s the rush, they should take a page from South Africa, where the authorities are still asking ‘what is bitcoin?’

I predict that the disappeared CEO of MTI, one Johann Steynberg will not return to SA before Bushiri comes lavitating on liewe Heksie’s broomstick! The most legal way to run a ponzi scheme in SA is to ‘run a church’ and fleece the flock, while occasionally making them graze like sheep (and cause them to ‘eat’ grass like the cows they are) without any visible legal consequences.

Strange how its gone all quiet now. There was almost a daily update when the liquidators were circling the corpse.

They wanted members to vote for them to cash in. Now that they have been appointed no word.

Tells me that these “liquidators” are probably as bad as MTI management or worse. Vultures that’s all.

Hahaaa. Looks like members will be paying more than they though. I dont think paying has stopped yet. Expensive lesson.

Many are probably in the next scam already. Like a moth to a flame.

@Mmmm.

Yes, I quite miss the counter-arguments of MTI devotees, who have done their “due diligent research”, or “crypto does not fall under the FSCA” *lol*

Don’t worry, it won’t be long before the next scheme will rise 😉

One guy told me “for every bad article you show me, I’ll show you a good one”…

Sounds totally legit

“The fact that the value of loss from crypto Ponzi schemes declined in 2020 suggests that “cryptocurrency users and the general public have grown more suspicious of such scams, or that potential Ponzi scheme operators have been scared off by the punishments doled out to the PlusToken operators,” says the report.”.

I don’t think sooooo, also to qualify the second reason, they not being scared off due to punishments they just moved somewhere else that is easier and maybe not crypto.

Maybe they just joined the ANC. Not one scam artist from that organisation ever gets convicted.

All those MTI fans on all the social media posts and blogs trying to convince everyone that its not a scam, are eating some serious crow right now

Here I was thinking Bitcoin itself was the biggest cryptocurrency fraud of 2020. Tulips anyone?

Quite “impressive” that a South African scheme was the biggest crypto-ponzi in 2020. Coming from a country that represents 1% of the global economy, is no mean feat.

Well….we certainly get noticed 😉 in the global crime stats rankings, like Numbeo, Statista, etc.

(Mister Steynberg and ‘friends’, please remember to include a few Rbillion on your next 2021 SARS return (…perhaps make a Provisional Tax payment this end Feb to avoid SARS interest) 🙂

I note under E-Filing’s CGT field, there is a special source code now for “Cryptocurrency gains”……please use it.

This achievement is in between other activities, such as claiming credit for spreading special & unique virus variants, leaders in cultivating corruption, whatever.

Would be interesting to know if the 3 year rule applies. I don’t think MTI was in existence long enough for anyone to have made a “capital gain”? It might be regarded as Trading Income and Tax must be paid at the persons income tax rate?

Not sure.

@Mmmm. You could be right….for many investors, it was a matter of getting into a “scheme of profit making” per the tax act. So straight Income Tax would likely apply.

And if investors want to try their luck by claiming it as a “trading loss” 😉 …then SARS will try to ring-fence it under Section 20A rules, by considering it a “suspect trade” on their list. Can’t win 😉

On your Marks, get set, Go to Jail.

I know someone who encouraged me to invest in MTI…
It took me all of 15 minutes of googling them to figure out it was a scam.
Do your due diligence! It amazes me how people see huge returns and just dive in.

I mean if you had an algorithm that made you 500% a year, would you go to all the effort of setting up a trading platform etc etc etc?

This one was obvious.

What I don’t understand is that a relatively reputable online publication such as Moneyweb, with a financial journalist like Ciaran Ryan, continues to allow advert driven articles like the OVEX ad, on their platform, luring people into a possible trap by promising way above ROI?? Check the top left article, just below the main articles, and on a weekly basis, it is always something about quick money or bitcoin. The common thread through all of “real”, historical articles on MTI, and all of the other scams, is….”if it is too good to be true…”. So, why would Moneyweb allow these type of advertisers on their platform? Advertising money to good despite what you are preaching?

End of comments.

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