Victims of the SA-founded Mirror Trading International (MTI) and its crypto-based Ponzi scheme that went belly-up in 2020 will be pleased to learn that one of the “big baddies” in it is finally getting a tiny taste of legal censure for his fraudulent ways.
News broke late on Monday that CEO Johann Steynberg was found guilty and sentenced by a judge in Brazil — where three years ago he skipped off to when the multibillion-rand con collapsed — albeit for a lesser crime than MTI’s injured parties would probably like to see.
Promoted as a network marketing and crypto investment initiative, MTI promised customers enormous monthly yields and further bonuses for bringing in new people — two classic red flags. Despite this, MTI grew quickly locally and abroad.
It collapsed just as quickly. The promises of autonomous, high-frequency forex and bitcoin trading were shown to be utter fiction, conducted by an unlicensed entity. “Investors” reported being unable to get their deposits out.
A hacking collective poked holes in the set-up, and the authorities came a-calling. It was all over by the end of 2020, bar the dodging of extradition and wound-licking. Reporting on the Steynberg sentencing news, local tech publication MyBroadband cites “sources with knowledge of MTI’s liquidation” who claim “over 46,000 bitcoin flowed through the scheme”.
Earlier in 2023 the Western Cape High Court officially ruled MTI an unlawful scheme of the Ponzi variety, though an appeal is expected. Brazilian authorities arrested Steynberg for the lesser crime of forged papers in 2021, after he provided falsified documents as part of travel bookings in the country, giving a task team just the excuse they needed to swoop in.
“Despite the aggravating circumstances of his crime,” MyBroadband editor Jan Vermeulen writes that “Steynberg’s three-year and six-month prison sentence was commuted to an additional fine to be paid to a court-designated charity”.
Funnily enough, it was also forged documents that put Terraform Labs co-founder Do Kwon behind bars in June. Kwon and business partner Chang-joon Han were trying to travel from Montenegro to Dubai on forged passports, having fled South Korea after the crash of TerraUSD and Luna coins in 2022, a failure that cost its investors about $35bn. South Korean prosecutors allege that Kwon provided false information to investors, and filed against him accordingly.
Speaking of well-known crypto founders and their criminal exploits, FTX’s Sam Bankman-Fried is back in the headlines this week with news that he has been remanded to a notorious Brooklyn jail while on trial for fraud in his handling of FTX funds and related business. Reuters reports that a US district judge in Manhattan sent Bankman-Fried into custody “for tampering with witnesses while free on $250m bond”.
For extra spice, an amended indictment filed on Monday included the new allegation that Bankman-Fried also used his ill-gotten cash to make political donations of at least $100m before the 2022 US midterms. Sky News writes: “He is said to have directed two of his company’s executives to send cash to both Democrats and Republicans to evade contribution limits and conceal where the funds had come from.”
This roundup is not (intentionally) cherry-picking, I must stress. Those really are just a few of the big news stories in crypto currently. Others include the continued battles between crypto exchange Binance and the US Securities & Exchange Commission (SEC), the antiprivacy allegations being lobbed at Worldcoin (the latest launch from OpenAI’s Sam Altman), and bankruptcy plan filings from crypto lender Celsius Network.
Even with current wins such as the continued mainstreaming of crypto (regular Joe investor numbers continue to grow year on year) and bitcoin regaining considerable value — up 75% from its 2022 low according to The New York Times — is it unreasonable to posit that the reputation of crypto is in tatters right now?
The great hope for a decentralised economy is plagued by big scandals and bigger egos. It seems to me that crypto is a victim of the same hype cycle it created, putting tremendous pressure on those few upstanding crypto businesses that have survived both the crypto winter and the wave of collapses. The rub of a financial market (somewhat) outside regulation is ... well, a financial risk unmitigated by said regulation.
In addition to the SEC and other organisations around the world, the loudest individual voice on the anticrypto scene these days may surprise you. Actor Ben McKenzie has fronted two so-so successful television series in his career — early 2000s young adult drama The OC, and Batman-adjacent show Gotham — but he is not exactly a household Hollywood name.
These days he is doing less acting and more anticrypto evangelising following a deep dive into crypto narratives during the pandemic. He has also just published a book, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, written in conjunction with journalist Jacob Silverman.
Opportunism
McKenzie is aware of the misfit of it — an actor doling out financial opinion. Yes, he has a degree in economics, but from decades back and no practice in it. He is “just” an actor, but he is also a refreshing break from his pop culture peers such as Matt Damon, Kim Kardashian, Floyd Mayweather and Tom Brady, who have taken money to endorse crypto with even less expertise in the mechanics of currency.
My qualms about his expertise aside, he seems to be driven by something I identify with: a furious, exasperated outrage at the blatant opportunism we see all over the crypto landscape — grifters exploiting folk under the narrative of “democratising finance”.
McKenzie is a table thumper who has written off the whole thing as a con; I am more middle-of-the-road in my take. To crib a phrase from an X-Files movie, I would describe my stance as “I want to believe”. The appeal of this new finance form, unhindered and innovative, is undeniable. The blockchain technology on which it is built is also unquestionably cool as a verification and decentralisation system.
Still, when McKenzie told CBS Mornings that “crypto, at the end of the day, is just a story, or rather a collection of stories”, it resonated. Collectively, those stories are rather dire these days.
• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.
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