As an aftermath of what is said to be South Africa’s largest Ponzi scheme, regulators are looking to propose stricter laws before scammers gain momentum
Regulators in South Africa, one of Africa’s major cryptocurrency hotspots, have expressed the need to exercise more control over crypto trading after the collapse of the allegedly largest-ever Ponzi scheme ever seen in the country.
Mirror Trading International, a self-proclaimed Bitcoin trading firm was placed in provisional liquidation last December after investors’ failure to withdraw their funds was bought to the attention of financial regulators in South Africa. With over 260,000 memberships worldwide, the firm reportedly handled 23,000 BTC, worth over $716 million, in the region.
This led to an investigation by the Financial Sector Conduct Authority (FSCA) that revealed the trading firm kept no accounting records or any kind of user database. CEO Johann Steynberg has supposedly fled the country to Brazil and the rest of the management claim to have been misled by him and report no knowledge of the mismanagement.
While the firm’s lawyers continue to stress that the FSCA is yet to determine if the company was a Ponzi scheme, FSCA’s head of enforcement Brandon Topham has made his sentiments vocal by stating that authorities must stop such crimes before they gather momentum.
“At the point, something becomes a Ponzi scheme, we have lost our jurisdiction. We need the police and the prosecuting authority to work fast and put people in jail”, Topham said, adding that the authority is currently working toward proposals to formally regulate crypto trading in the country.
“I have been on radio shows where people say, ‘I am a professional Ponzi investor. You get in quick and get out and like with any business you have to risk money to make money.’ We need to make an example of MTI so that people understand that investing in a Ponzi is never a good idea”, the regulator further explained.
The Texas State Securities Board shut down MTI last July, declaring the project was a multi-level marketing scheme. South Africa’s regulators were already suspicious by then as the firm claimed it would return 10% profit per month for every user.
“It’s going to take a serious investigation to ascertain how much was involved,” Topham told Bloomberg, revealing that two other firms were currently under investigation based on their connections to MTI. An expanded final liquidation order against MTI is expected by March 1st 2021, considering that the legal proceedings remain unopposed.
While regulators have been considering comprehensive crypto trading regulations for years, the rising profile of cryptocurrencies and Bitcoin, coupled with such scams, have made the creation of concrete laws undeniably important.