South Africa regulator intends to impose a fine of $7 million against trading platform Mirror Trading International (MTI)
Not long ago, disgraced Bitcoin trading platform Mirror Trading International (MTI) has been placed into final liquidation by order of the Western Cape High Court. While everyone is still surprised, the Financial Sector Conduct Authority (FSCA) said it intends to impose a $7 million fine on key players behind MTI.
The Financial Sector Conduct Authority (FSCA)’s letter
South Africa regulator wants Mirror Trading International to pay millions for contravening financial sector law
MTI rose to prominence last year amid the Covid-19 pandemic, using a strong social media presence, YouTube videos, and referrals by friends and family to attract tens of thousands of members. It promised a sky-high return for the “little man in the street” but collapsed in early December after it stopped paying out funds to its members.
The Financial Sector Conduct Authority (FSCA) sent a letter to the project CEO and other members of the management team, indicating a proposal to fine their company $7 million for activities contrary to the law of the financial sector.
The FSCA also explains how CEO Johann Steynberg and MTI executives Cheri Marks used disinformation to perpetuate the Ponzi scheme before it was debunked in December 2020. They also reveal the various provisions of South Africa financial sector law which were allegedly violated by MTI starting in April 2019.
First, the FSCA suggests that the first violation of the MTI occurred when trading was conducted in derivative instruments based on forex pairs, through a platform broker named FX Choice. Concerning this trading, the FSCA asserts that MTI was not in possession of a financial services provider license as contemplated in section 8 of the Financial Advisory & Intermediary Services Act 37 of 2002 (FAIS Act).
“As this was done without a license, MTI was also in contravention of section 111 of the Financial Sector Regulation Act 9 of 2017 (FSR Act)”, the regulator also added.
Going on, the regulator alleges that between August 2019 and October 2020, MTI violated the same of the FSR Act after Steynberg claimed that the company was employed a bot together with a head trader and trading team to make all its trading decisions.
Meanwhile, in the third period – October 2020 to December 2020 – MTI announced it changed its trading activities to trade in derivative instruments based on Bitcoin. This means MTI means it no longer required an FSP license. However, the FSCA insists this is not the case as what Steynberg submitted to the regulator proposed to the contrary.
“It is not correct as the submissions received from Steynberg revealed that the crypto assets were alleged to be traded in the form of a derivative product, which means MTI still required a license from the Authority. It also means that MTI and its senior management were still contravening section 7(1) of the FAIS Act”, the FSCA said.
Finally, the letter reveals that members of MTI’s management team will be given the opportunity to submit an investigation report as well as on the proposed administrative penalty. However, if no such submission is received before the close of business on August 6, 2021, the FSCA may proceed with the proposed regulatory and enforcement action.
The appearance of the letter as well as its leak to the South African media comes just days after a court issued a final liquidation order against MTI.
MTI placed into final liquidation as CEO remains missing
Mirror Trading International (MTI) – which at one stage claimed to have over 100 000 members and may have taken billions of rands in investments – has been placed into final liquidation. The ruling was handed down by acting Western Cape High Court Judge Alma de Wet on 30 June.
De Wet heard the final liquidation application for the site in mid-June. At the hearing, Advocate Rinier Raubenheimer, for the applicants, told the court that MTI had accepted billions of rands in hard-earned savings from the public despite having absolutely no financial controls. It was provisionally liquidated later that month after Steynberg disappeared.
In the first half of 2020, before the site was shut down, Steynberg told financial market regulator the Financial Sector Conduct Authority that MTI was managing 16 000 bitcoin. But the FSCA has also accused Steynberg, and other MTI’s leaders, of repeatedly lying to it.
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