The joint liquidators of South African-based Mirror Trading International (MTI) have taken “progressive steps” to obtain recognition of the liquidation order and their statutory powers in countries across South America, Europe, Asia, the Middle East, and Africa.
This comes hot on the heels of a British court recognising the South African liquidators of the bitcoin Ponzi and pyramid scheme as the designated bankruptcy proceeding under UK law. The acknowledgment was made by Judge Catherine Burton in the Insolvency and Companies Court of England and Wales on December 19 last year, as reported by specialist insolvency publication Global Restructuring Review.
In addition to the UK, recognition has been secured in the United States, Canada, Belgium, Australia, and Namibia.
According to the joint liquidators of MTI, the purpose of a recognition order abroad is to place the liquidators in a position properly to execute their statutory duties towards the estate and the body of creditors and, more specifically, to enable them to investigate and pursue creditors’ claims.
“Without recognition of the liquidation order and the statutory powers of the liquidators in the relevant jurisdictions abroad, the liquidators will not be able to investigate and pursue possible claims to the benefit of the creditors,” the joint liquidators said.
Recognition in the US was successfully obtained in March last year.
In September last year, Moonstone reported that the US District Court for the Western District of Texas had ordered MTI to pay more than $1.7 billion (about R32bn) to tens of thousands of people who were defrauded in the US.
The order stemmed from a Commodity Futures Trading Commission (CFTC) complaint filed in June 2022. The CFTC is an independent federal agency that regulates the derivatives markets in the US.
A few days after the order, the joint liquidators of MTI reached an agreement with the CFTC not to pursue the claim against the estate.
The joint liquidators explained that, after negotiations with the CFTC, they entered into a consent order.
“It was agreed with the CFTC that their claim against the estate would be subordinated to the recovery actions to be launched by the joint liquidators.”
If the order for the recovery of funds had not been subordinated, it would have affected the dividends to be awarded to the proven creditors.
“It further would have hampered the liquidators’ right to recover assets or claims to the benefit of the creditors. The success achieved in this matter was a crucial step towards protecting the rights of creditors on a global scale,” the joint liquidators said.
Update on dividends
MTI collapsed in December 2020 after it halted payments to members. Johann Steynberg, MTI’s founder and chief executive, fled to Brazil. He was tracked down and detained on an Interpol arrest warrant in mid-2022. He is awaiting an extradition hearing.
It was reported in August last year that a Brazilian judge had found Steynberg guilty of using a forged identity document. Steynberg’s three-year and six-month prison sentence was commuted to an additional fine of R510 000 to be paid to a court-designated charity.
From May 2018 to March 2021, Steynberg, individually and as the controlling person of MTI, engaged in an international fraudulent multilevel marketing scheme to solicit Bitcoin from people for participation in an unregistered commodity pool operated by MTI.
MTI was placed in provisional liquidation when investors tried without success to withdraw funds from the scheme. AW van Rooyen (Investrust Insolvency Practitioners), H Bester (Tygerberg Trustees), J Barnard and D Basson (Tshwane Trust Co) were appointed as joint liquidators.
According to the Chainanalysis 2020 Crypto Crime Report, MTI was the world’s biggest cryptocurrency Ponzi scam of 2020 because about $589 million was lost.
A circulation sent to creditors on 26 January noted that claims received, printed, and registered up to 19 January totalled 8 550.
Providing an update on the processing of creditors’ claims, the joint liquidators said that on 9 November last year, Judge Alan Maher issued a ruling on the application for a declaration regarding claims in the estate, including those already filed and those yet to be brought forward, and how the liquidators should handle them.
The order specifically addresses claims from investors and categorises them into three distinct classes.
Class 1 investors:
- Investors who received zero in return for their investment/s in MTI.
- Claims should be lodged, calculated in rand value of Bitcoin, as at the date upon which the investor made the investment in MTI.
- Claims must comply with section 44 of the Insolvency Act.
Class 2 investors:
- Investors who received a return on their investments but received less than what they invested.
- Claims should be lodged, calculated in rand value of Bitcoin in an amount equal to their impoverishment, quantified as follows: value of investors’ investment in MTI calculated in rand value, as at the date upon which the investor made the relevant investment in MTI minus value of returns in rand value, as at the date upon which MTI paid the relevant return (or portion thereof) to the investor.
- Claims must comply with section 44 of the Insolvency Act.
Class 3 investors:
- Investors who received returns that exceeded the amount of capital invested in MTI (that is, profiting from MTI).
- No claim against MTI, and any claims submitted will be rejected.
Dividends can be paid only once the second liquidation and distribution account has been finalised and lodged with the Master of the High Court.
“In terms of the first liquidation and distribution account, only Sars was paid as proven creditor,” the joint liquidators said.
What happens next
Once the distribution account has been lodged with the Master of the High Court, a query sheet will be issued, seeking clarification from the liquidators. They must then provide formal answers. Once the Master is satisfied, permission will be granted to advertise the account, open for inspection for 14 days. If no objections arise, the master may confirm the account, allowing for the distribution of dividends.
“The liquidators are implementing a process where all rejected claims can be considered by the liquidators for the approval or amendment thereof, and all proven claims are to be accepted or amended if required to be in line with the declaratory order,” the joint liquidators said.
At this stage, the joint liquidators stated, it was not possible to determine when the distribution account would be finalised and lodged with the Master of the High Court.
The joint liquidators said they expect to have a more precise timeframe within the next one to two months.