Creditors voice fury at MTI liquidators after all investor claims rejected

The second meeting of creditors of the liquidated bitcoin scheme Mirror Trading International (MTI) ended with all investor claims being rejected on the grounds that they were ‘illegible’.

The only claim accepted by the Master of the Cape High Court, Zukile Mabusela, was from the trustee of JNX Online, a company set up by MTI founder Johann Steynberg and his wife Nerina. JNX Online was used by Steynberg to buy and sell bitcoin (BTC) and to pay creditors and employees of MTI.

Hendrik van Staden, representing 920 creditors to the value of R229.8 million, told the Master he was not satisfied that the claims had been rejected.

“I want to remind liquidators that they are there to act in the best interests of investors and/or creditors and they must be transparent and engage with creditors, and I will be communicating with them in the interests of the net losers in MTI, so that justice can prevail. Let’s clean up the liquidation industry in SA and make sure liquidators are held responsible.”

Van Staden said he could not accept that all claims are illegible, and pointed out that investor claims were likewise rejected at the first creditors meeting held in 2021.

The rejection of claims prejudices investors by denying them the opportunity to vote on any resolutions that were tabled by the liquidators.

‘Blank cheque’ anger

Creditors are reportedly angry that these resolutions grant the liquidators wide powers to hold inquiries and do whatever is necessary to chase down missing bitcoin, as they feel this is a blank cheque to run up costs at their expense.

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As Moneyweb previously reported, MTI was declared the world’s biggest crypto scam in 2020 by Chainalysis. By some accounts, more than 29 000 BTC passed through the system, representing a value of more than R19 billion at current bitcoin prices.

MTI was red-flagged by the Financial Sector Conduct Authority (FSCA) in 2020 for trading without a licence. The scheme relied on multi-level marketing to grow its member base to more than 200 000 members, offering returns of up to 10% a month on bitcoin deposited with the company. The FSCA found no evidence of any successful trading that could account for returns like this.

MTI CEO Johann Steynberg was recently arrested in Brazil, after fleeing South Africa more than a year ago when investors’ requests for withdrawal of funds went unanswered. The company was subsequently placed in liquidation.

Read: MTI placed in final liquidation, 8 000 more bitcoin traced

Steynberg reportedly faces deportation either to the US or SA.

Liquidators ‘incapable’

Chris Edeling, representing two creditors, told the creditors meeting on Friday (February 4) that the Master was correct to reject the claims, not only because of illegibility, but because of bad causes of action.

When Sybrand Tintinger, the lawyer representing the liquidators, attempted to call the meeting to a close, Chris Kriel, representing about 12 000 investors, expressed his frustration that the communication from the liquidators was null and void. “You [the Master] said these liquidators need to set a threshold for a burden of proof for this liquidation.

“The liquidators are being obnoxious,” he said.

Some 60% of money invested in MTI came from SA, the other 40% from abroad. The liquidators had access to the back office computer systems so they were in a position to reconstruct who had invested bitcoin and how much, but this had not happened.

“To reject thousands of these claims on a technicality from the liquidators where they didn’t communicate that technicality to the investors is obnoxious. I am going to publish this meeting across the world and tell the people how they are being treated by these liquidators,” said Kriel.

He argued that the liquidators were incapable of doing their assigned jobs.

Though they had access to the backend records, they had not set a burden of proof that investors could easily follow, so they simply rejected all claims out of hand.

“I challenge these liquidators to tell us how they intend to prove these claims. One year later they haven’t tabled a single claim,” added Kriel.

Henry Honiball, representing about 18 000 members, said confidence in the liquidators “is not good at all”.

Part of the problem is that investors attempting to submit claims do not have access to the back office systems that recorded their BTC deposits into MTI. “The back office made available by the liquidators has been tampered with. We have people who are devastated out there, and liquidators are there to work for us.”

Shareholder claim also rejected

Clynton Marks, 50% shareholder in MTI and a creditor to the tune of R135.6 million in bitcoin loaned to MTI, likewise had his claim rejected.

His counsel, John Suttner SC, asked why the claim was rejected as it was not a claim for the return of an investment. It’s a clear liquidated claim, said Suttner.

The Master replied that the Marks claim was not substantiated.

Several creditors are reportedly about to take the liquidation on review for what they regard as multiple irregularities, such as the blanket rejection of claims, which denied creditors the right to vote on resolutions that allow the liquidators to run up costs at their expense.

Responding to criticism that the liquidators had failed to respond to correspondence from creditors, Tintinger replied that all correspondence was attended to, and invited creditors to communicate with the law firm. However, those purporting to act on behalf of a group of creditors must supply powers of attorney.

Part of the problem faced by liquidators is that there were groups where MTI winners – those who withdrew more than they put in – were mixed up with losers. Some creditors were claiming their BTC still belonged to them as they had deposited the cryptocurrency into a club.

He said the liquidators maintained an open door policy and had nothing to hide.

Mabusela attempted to allay the fears of angry creditors, saying there would be future special meetings of creditors to prove all claims.

The real tragedy

The real tragedy of the MTI scandal was recorded in the comments section to the side of the Zoom meeting.

“What happened to the 8 000 BTC the liquidators said they found?” asked one commentator

“If the liquidators have done nothing in this past year, we can assume they will not be drawing any fees from the members,” said another.

“What about the thousands of people whose lives have been absolutely devastated?” wrote another.

“People committing suicide, people living in garages.”

All this meeting proved is that there is a long and potentially litigious road ahead before the MTI matter is laid to rest.