Mirror Trading International (MTI) liquidators issued a press statement last week with some explosive claims against the ‘masterminds’ behind the failed crypto scheme.
Liquidators say the masterminds were Clinton Marx and Johann Steinberg, who were among the main winners of the scheme. Steinberg fled the country in December 2020 when investor requests to withdraw funds stalled. Steinberg was arrested in Brazil late last year.
FSCA agrees to waive R50m admin penalty in MTI
MTI’s Johan Steinberg has been arrested in Brazil
Statistics provided by Liquidators suggest that more than 300,000 investors from around the world were lured into the scheme by promising to earn 10% per month in Bitcoin (BTC). MTI has been rated as the largest crypto scam in the world by 2020 by Chanellyosis.
Lawyers representing some investors have questioned the accuracy of the figures given to liquidators. The number of members varies from about 200,000 to 380,000. Liquidators recovered 1,281 bitcoins from a Belize-based broker called FX Choice and later sold them for about R1.3 billion.
In a statement last week, Liquidators claimed that two months before the cryptocurrency scandal closed with investors paying R30 million, although there appears to be no supporting evidence before the Cape High Court, where multiple lawsuits are pending. Liquidator and MTI Investor.
Meanwhile, Marx and another MTI investor, Henry Honibel, have asked the Cape High Court to remove six court-appointed liquidators from the case, alleging dishonesty and fraud.
The only claim to be admitted by MTI liquidators is a claim of R6.2 million from JNX Online, a company founded by MTI founder Steinberg and his wife Nerina.
JNX ‘not a creditor’
JNX Online Steinberg used BTC to buy, sell and pay lenders and employees. Marx and Honibel argue that JNX Online is not a creditor of MTI, and that it was well-known to them, yet they have accepted a claim from the company as a process of pushing through a number of resolutions that MTI lenders consider to be antithetical to the wider masses.
Marx and Honibel argue that liquidators need a friendly ‘creditor’ to approve their proposed resolution. They say these resolutions are so broad that it allows liquidators to run costs at their own expense and compensate them for any losses or claims incurred from the business.
Once JNX was liquidated, MTI liquidators hired their associates as liquidators of JNX, without arms-length transactions, and then “accepted JNX’s claim against MTI that they knew they were not owed”, a According to the affidavit by Marx.
Liquidators say the Marx and Honibel case is an abuse of court process, has no legal standing, and is an attempt by MTI to suspend another ongoing court case for declaring a registry scheme.
They argue that this means that any money provided by the scheme is illegal and must be paid. The trial is set to resume on May 31.
Liquidators are urging Marx and Honeyball to dismiss the lawsuit, along with penalties.
Marx argued that MTI could not be considered bankrupt because it had recovered BTC worth about R1.3 billion and claimed a total of R300 million. Older company laws and bankruptcy laws only allow a company to close off its inability to repay a loan.
Read: MTI Liquidators agree to process the net loss before the winners
If the court declares MTI as a register scheme, that argument will be shattered.
The court filing reveals some interesting results about MTI:
- Liquidators say more than 304,000 investors have joined the scheme. Of these, 204,000 lost their net, meaning they have claims against MTI.
- About 58,000 investors have benefited from the project.
- About 39 193 BTCs were invested in MTI and 32 285 BTCs were withdrawn.
- Marks is claimed to be one of the top winners of the scheme, having invested only 22 BTC (R10.7 million at current value) and withdrawn 219 BTC (R106 million at current value).
- The nature of the MTI pyramid implies that there were several huge winners, including Marx, who had 189 138 investors under one ‘down-line’ (on which he would receive commissions) and another 71,631 investors on the other downline. He was strategically placed at the top of the pyramid with Steinberg “to ensure that he was enriched by each new member of the scheme as a ‘founding member’,” the liquidators say.
- Liquidators say MTI had a deficit of about 6900 BTC (R3.3 billion) due to ‘fraud and theft’ in the company.
- Liquidators further claim that claims for 10% profit per month (or even 0.5% per day) were false and that all investor accounting reflecting profit was similarly false.
MTI investors should probably prepare themselves for a long, drawn-out court battle. No matter which party loses in the Panji Scheme application, there is a possibility to appeal considering the amount of funds involved.
In the case of a case where MTI was a registry scheme, the liquidators relied on evidence from the Financial Sector Conduct Authority (FSCA), which in turn was based on a statement issued by Belize Broker, FX Choice.
The validity of the FX Choice Statement issued by the FSCA and MTI back office admin systems has been challenged by lawyers for some investors. In this case, it is impossible to know how much bitcoin is available for redistribution, Honibel said in an affidavit before the court.
Listen to MoneyWeb crypto podcast host Ciaran Ryan talk to Shawn Newman, who is writing a book on the MTI scandal: