Editor’s note A MIRROR CRACKED
The entirely predictable demise of Mirror Trading is the story of a scam foretold. And it’s a story which, unusually, reflects well on the FSCA
Well, who could have seen that coming? Besides the “so-called experts” and “mainstream media”, that is? In late December, get-rich-quick scheme Mirror Trading International (MTI) was placed in liquidation, leaving more than 170,000 people wondering what had happened to the millions in bitcoin they thought they had.
Founder Johann Steynberg, a 37-year-old computer programmer from Polokwane with a dubious past in get-richquick schemes, is said to have fled to Brazil or Panama.
Whenever a con like this collapses, you’ll see wide-eyed “investors” demanding to know why they weren’t warned. Well, they were. But like those denying Donald Trump’s loss, if they didn’t hear it, it’s because they chose to tune out.
SA’S financial press — including Moneyweb and Mybroadband — had been warning about this inevitability for months. Last August, even as Steynberg assured the FM that “we operate legally”, this magazine described MTI as the “least convincing business model this side of the radical economic transformation magic money tree”. This implausible scam, we said, was “destined to end in tears”.
Now, it has. In the 124-page liquidation application in the Western Cape High Court, Kwazulu-natal security professional Anton Lee said he’d been “recruited” in January 2020 with wild tales of how MTI was delivering profits of 10% per month, which it got by trading bitcoin.
The way it worked was that when you joined the scheme, you were told to move your bitcoin from your digital wallet to MTI’S. This bitcoin would be put into a “trading pool” and used to finance a series of forex and crypto trades, made using “exclusively contracted” artificial intelligence software.
Lee put in R3,000 worth of bitcoin. Soon enough, he received statements “confirming my investment had grown by up to 10% [per day]”. Impressed, he told his family about it, who piled in too. By December, when the mirror cracked, he and his family had put in $68,533 — R1m in today’s money.
Though liquidators have now been appointed, the odds of him or the other investors getting anything back are slim.
Lee tells the FM: “It’s all right for me — my wife and I still have jobs — but there were many people who quit their jobs and put everything into this.”
He implicitly trusted the sale pitch from Steynberg and his fierce marketing sidekick, Cheri Marks, who would rage at articles claiming MTI was a scam. “MTI has delivered on its brand promise. Every single member has had growth in bitcoin. Every single one. And no amount of speculation and sensationalism changes that fact,” she told one critic.
Lee says Marks and Steynberg had silver tongues. “In early December, when I wanted to withdraw, they told us everything was fine. They were just so convincing.”
In September, a Facebook user told Marks: “When this is all over, you’re going to have a difficult time explaining yourself to the courts.” She replied: “You clearly don’t know the elements that need to be proved for a criminal case.”
Now, Marks is singing a different tune. On December 22 she sent out a letter to investors, saying: “Johann is alive; [he] is in Brazil as far as we know. [He] has not been truthful with management, leaders or members. We, as management and leaders, do not know if our bitcoin is safe.”
Last week her lawyers sent answers to TV programme Carte Blanche, saying: “She only discovered upon reading the [regulator’s] press release of December 17 2020 that the authenticity of the trades [was] questioned.”
Which, of course, isn’t true. The trades had been questioned for months by pretty much the entire media industry and every investment expert. If she dismissed it all as a “negative media” conspiracy, well, she blinkered herself.
What’s notable about this case, compared with past scams, is the response of the regulator, the Financial Sector Conduct Authority (FSCA). In previous Ponzi schemes, the regulator has been caught napping. But not here.
Six months ago, the FSCA’S investigations head, Brandon Topham, warned that MTI’S returns “seem far-fetched and unrealistic” and the R2.9bn supposedly in its accounts may not exist. In November, Topham even opened a criminal case against MTI at the Stellenbosch police station and in December, the FSCA branded it “illegal”.
And yet investors painted this as a conspiracy. One MTI insider described it as a “phenomenal gift to society” and said the FSCA was cracking down on it because Steynberg “is stepping on the toes of major financial institutions”. It’s a tedious but predictable old trope.
Where we stand now is, equally predictably, with Steynberg having told Marks and others on December 2 he was heading to Brazil. Then, he stopped answering e-mails.
But did they never stop to ask how a computer programmer like Steynberg had hit upon a secret miracle investment plan, which allowed him to vastly trump the performance of seasoned investment professionals?
Steynberg, in fact, knew so little about investing that when he was told by Topham that MTI seemed to be trading derivatives last year, he replied: “What’s a derivative?”
For investors, the question is where is their money.
Again, the news isn’t good. Some months ago, Steynberg transferred clients’ bitcoin from MTI’S initial broker, Fxchoice, to a new entity called Trade3000. And just guess who, it turns out, actually owns Trade3000?
As Lee’s affidavit put it: “Steynberg and Trade3000 are all one and the same, and Steynberg is the only individual to have access and full control over [MTI] member funds, and [he] has since disappeared.” In other words, if Steynberg is sitting in a bar in Panamá Viejo or sipping a caipirinha on Copacabana beach, he won’t struggle to pay the bill.
Six months ago, the regulator warned that the R2.9bn supposedly in MTI’S accounts may not exist