An embattled bitcoin investment company, Mirror Trading International (MTI)’s troubles took another twist August 18 after the South African regulator, Financial Sector Conduct Authority (FSCA) said that it is investigating the investment company.
MTI’s latest conflict with the regulator follows the cease and desist order issued against it by the Texas States Securities Board (TSSB) in July.
In a press statement, the FSCA says it is of the “view that the current MTI business model requires it to be in possession of a financial service provider license.” TSSB similarly accuses MTI of operating in Texas without the requisite approvals or licenses.
The South African regulator explains that it had been informed by MTI that “they accept clients’ funds in the form of bitcoin. The funds are then pooled into “one trading account on a forex derivative trading platform.” MTI will then “conduct high-frequency trading through the utilization of a bot.”
However, the regulator says if MTI is carrying out the activities as described, “then this amounts to financial services, hence the license requirement.”
Still, the South African regulator says it has more significant concerns about the investment company’s activities. The statement adds that while “MTI claims to have more than $168 million (at current conversion rates) in clients’ funds in trading accounts,” the regulator has “not been able to conclusively confirm that the funds exist.”
Meanwhile, the FSCA statement seems to repeat earlier concerns raised by TSSB about the “far-fetched and unrealistic” returns on the investments claimed by MTI. According to MTI “its Bot-trading is able to generate consistent profits of an average of 10% per month.”
The FSCA’s stance on the bitcoin investment company seems to rely on public comments made by FX Choice, the previous platform broker for MTI. At the beginning of August, FX Choice issued a statement in which it says it blocked the MTI account after noting some “compliance concerns.”
Consequently, the regulator says it is in “the process of obtaining confirmation from FX Choice of the correctness of the statements attributed to them.”
While investigations are ongoing, the regulator does acknowledge that MTI “has partially co-operated with the FSCA.”
Despite this acknowledgment, the regulator statement goes on to say:
We are reviewing the information as it becomes available and will involve the South African Police Service if the discrepancies are confirmed. MTI has undertaken to inform all of its clients of the investigation and to provide the opportunity to all its clients to withdraw their assets that are with MTI. We recommend that clients request refunds into their own accounts as soon as possible.
After the TSSB issued the cease and desist order, the MTI CEO Johann Steynberg, issued a statement denying that his organization is running a multi-level scam. Steynberg also said MTI would cooperate with FSCA and TSSB.
Similarly, and perhaps in anticipation of the press statement by FSCA, Steynberg issued another statement on behalf of MTI on August 18. In the statement, Steynberg argues that MTI has furnished the FSCA with all the information it requested.
However, the investment company says “after considerable time spent with the FSCA it has become clear to MTI that they will not guide MTI as to what needs to be done in order to be regulated and FSCA approved.”
The CEO clarifies that while the process of engaging FSCA was done “so that our operations would not be interrupted” is it by “no means an admission of any wrongdoing.”
Still, Steynberg’s statement suggests there is an impasse between MTI and the FSCA. Consequently, MTI has since taken steps that seemingly moves it outside the FSCA regulatory ambit.
“As a result of the current situation with the FSCA, as mentioned above, MTI has changed from Forex trading to Crypto’s and we are thoroughly excited about this change,” reads part of the MTI’s statement.
Meanwhile, Steynberg also admits that FX Choice has blocked MTI from accessing its account prompting the investment company to look for another broker.
Interestingly, however, the MTI statement says the investment company “has taken the decision that the details of its new broker will not be made public.” In justifying this position, the company argues this decision has been in order “to protect our relationship with the broker and we ask that MTI members respect that.
The new broker is not regulated.
Steynberg ends the five paged statement by assuring clients they “have the freedom to remain with MTI or to withdraw. The withdrawal and administration service that MTI offers to members is FREE.”