While the former CEO of Mirror Trading International (MTI), Johann Steynberg, has reportedly died while under house arrest in Brazil, his associates in South Africa and around the world still walk free.
MTI launched in 2019 and drew in members worldwide by promising huge monthly returns of around 10%. It also offered ways for members to earn substantial bonuses by recruiting more people.
It was the biggest pyramid scheme ever operated in South Africa. One estimate found that at least 39,193.3 bitcoins were deposited into the scam over its lifetime.
Even using the most conservative estimates for the scheme’s value at the time of its collapse, at least R14.7 billion worth of bitcoin flowed through it.
This dwarfs all other South African pyramid and Ponzi-type schemes for which estimated deposits are available, including Krion, Travel Ventures International, and Africrypt.
MTI collapsed in December 2020 after Steynberg disappeared while travelling in Brazil. However, the writing had been on the wall for weeks before then, with members reporting problems with withdrawals.
When withdrawals stopped entirely in December 2020, MTI was placed in provisional liquidation. Soon thereafter, a final liquidation order was granted.
Steynberg resurfaced almost exactly a year later when he was arrested in Brazil for using a fake ID, and MTI was ultimately declared a pyramid and Ponzi-type scheme in April 2023.
According to Brazilian authorities, Steynberg died in April 2024 of a pulmonary thromboembolism while under house arrest, awaiting his extradition hearing.
Meanwhile, MTI’s liquidators are pursuing claims against perpetrators and victims of the scheme alike in South Africa and around the world, hoping to recover more money for the estate.
They have already recovered close to R1.1 billion with the help of the Financial Sector Conduct Authority, mostly by sheer luck.
This was thanks to MTI’s former brokerage, FXChoice, freezing 1,281 bitcoins in June 2020 after detecting suspicious activity on the account and conducting an internal investigation.
The first official warning about MTI, issued by the Texas Securities Commission, only came out about a month later.
Thanks to FXChoice’s swift action and the timing of MTI’s liquidation, the liquidators banked over a billion rand by selling the bitcoins on Luno.
A substantial portion of that has already been spent on court cases, inquiries, and summonses issued worldwide.
This has resulted in some arrests, but these have all been for a form of contempt of court — either for failing to appear before an insolvency inquiry, or not giving satisfactory answers to questions.
None of these proceedings is criminal, as that is the domain of law enforcement agencies and prosecuting authorities in the countries where the scheme was perpetrated.
In contrast, prosecution was swift in the United States government’s case against Sam Bankman-Fried for defrauding the customers of cryptocurrency exchange FTX.
FTX’s collapse followed the now clichéd pattern from Ernest Hemingway’s breakthrough novel, The Sun Also Rises, in which two characters have the following exchange:
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Between 2 November and 10 November 2022, it began to emerge that Bankman-Fried and his associates had commingled customer funds from FTX with his trading firm, Alameda Research.
In less than two weeks, FTX and Alameda went from assuring customers and the market that everything was fine, to approaching rival Binance for a bailout, to declaring bankruptcy.
Bankman-Fried resigned as CEO of FTX on 11 November 2022. A month later, on 12 December, he was arrested by the Royal Bahamas Police Force in his apartment complex.
It took less than a year for him to be convicted. Bankman-Fried was found guilty of conspiracy and wire fraud and sentenced to 25 years in prison. He has appealed the sentence and asked for a retrial.
Former Alameda Research CEO Caroline Ellison was sentenced to two years in prison, receiving a reduced sentence in exchange for testifying against Bankman-Fried.
FTX CTO and co-founder Gary Wang and FTX chief engineer Nishad Singh received suspended sentences in exchange for their cooperation.
While examples like the Bankman-Fried case make it seem as though the United States is extremely effective at prosecuting such crimes, there have also not been any arrests of U.S.-based MTI kingpins.
In fact, the only action U.S. authorities took was the Commodity Futures Trading Commission bringing a civil damages case against Johann Steynberg.
It obtained an order for Steynberg to pay $1,733,838,372 (R33 billion at the time) in restitution to defrauded victims and a $1,733,838,372 civil monetary penalty — the highest such penalty ordered in any CFTC case.
Where there is a single clear mastermind for authorities to pursue, arrests and prosecutions can be swift and decisive. Unfortunately, when it comes to pyramid schemes, there is safety in numbers for scammers.
This creates an environment where more unscrupulous individuals knowingly climb into and promote a pyramid scheme if they think they are early enough to extract some gains before it collapses.
The Finance Sector Conduct Authority is desperately trying to combat this culture in South Africa. However, scammers know South Africa’s law enforcement agencies don’t have the capacity to come after them all.
MyBroadband has spoken to officers investigating pyramids and other illegal schemes in South Africa, and they want nothing more than to prosecute perpetrators.
Unfortunately, the Hawks and National Prosecuting Authority are woefully under-resourced, making progress on these cases slow-going.
