Where cryptocurrency is concerned, 2020 was not exactly surprising, considering that 2019 was even much worse. In 2020, cryptocurrency worth USD 2.7 Bn was lost in frauds; however, it represents 50% of the USD 7 Bn lost in 2019.
However, whatever the case, some unusual happenings from the previous year have earned South Africa a bad name since the hugest crypto fraud of 2020 occurred here. It is the first time that a country in Africa has topped this unsavory list.
It was revealed by a blockchain analysis firm, Chainanalysis, in a 2021 Crypto Crime Report. The report indicates that the famous and much-publicized scam associated with MTI (Mirror Trading International), a supposed bitcoin trading platform with offices in Stellenbosch and Johannesburg, was 2020’s most significant crypto-connected fraud.
The MTI scam made away with bitcoin worth USD 588 Mn (ZAR 8.6 Bn) across 470,000 transactions, said Chainalysis. The magnitude of people duped by the fraud is likely to be thousands, from states such as South Africa (it consists of more than 50% of MTI’s web traffic) and other areas like the U.K., Canada, the U.S., and Mexico.
Even though the MTI fraud is smaller in size than the 2019 PlusToken incident, where cryptocurrency valued at USD 3 Bn was stolen from millions of victims, mostly Asian, South Africa’s locally set up fraud ‘surpassed’ the biggest incident like this in the globe in 2020, indicated the report, which also says that a majority of the other crypto frauds noted in the year were of a significantly smaller scale.
At the end of last year, MTI was placed in provisional liquidation. The fraud’s circumstances have elicited stricter observation on the flourishing crypto sector in South Africa, which ranks second in Africa, where volume and value of crypto transactions is concerned.
Before the fraud was discovered, MTI had enticed investors numbering thousands from all over the globe by promising profits of a maximum of 10% each month.
‘According to MTI, it is a passive source of income. Its website indicates that users just deposit bitcoin worth a minimum of USD 100.00, and MTI guarantees to use a a foreign exchange trading software (AI-powered) to grow it,’ states the report, which studies the firm’s website’s web traffic and transactions flows.
‘The site shows that clients can gain continous daily profits of 0.5%, translating to 500% yearly profits,’ it also says.’Algorithmic trading presents a prevalent site for most cryptocurrency invesment frauds,’ states Chainalysis.
Despite clinging to a picture of fake legitimacy and enticing innocent investors from 2018, MTI has experienced a period of ‘fraud warning shadowing it from almost the time it was established. So, it was not surprising when the FSCA (Financial Sector Conduct Authority), the South African Regulator, cautioned about MTI and asked investors to ask for a refund in August 2020.
Matters went awry the previous December when the FSCA sued the MTI, alleging that its investigation discovered that the firm faked trade statements, failed to declare losses, and undertook other fraudulent acts to con the market.
The Chainanalysis report also indicates that the investigation unearthed information that more than 16,000 bitcoin of claimed client investment money was not accounted for. The MTI’s CEO is still missing.
‘According to MTI, it moved this money to a different FX trading platform after its existing platform banned MTI because of its fraud reputation; however, according to the new platform, this money was not deposited,’ indicates part of the report.
‘After filing of the charges, MTI clients have lamented that they are not able to access the funds they deposited to the platform or withdraw it any more, and Johann Steyberg, the MTI CEO has ran away from South Africa.’
To better understand how the fraud operated, Chainalysis also went through the MTI’S cryptocurrency transaction background.
‘MTI Club has obtained bitcoin worth USD 589 Mn across over 470,000 transactions, mainly from exchanges and self-hosted wallets also. Also, MTI has sent and obtained a large amount of money to and from a famous FX trading platform, which is bitcoin-friendly,’ says the report.
‘Maybe the most fascinating is how MTI Club seems to use a famous cryptocurrency gambling servince as a cash-out and money laundering system,’ it states.
‘The platform presents a very dangerous MTI funds destination, in terms of volume; it obtained cryptocurrency worth USD 39 Mn in 2020 from the fraud.’
Apart from MTI, other moderately massive crypto frauds in the globe in 2020 were discovered in J-enco, TorqueBot, PGI Global, Prance Gold Holdings, and a few more.
There are speculations that the crypto frauds overall decrease recorded worldwide may be linked to the thought that ‘the general public and cryptocurrency users have become increasingly wary of frauds like these or that the retributions meted on the PlusToken operators have scared off likely Pozi scheme operators.
According to some reports, the Chinese authorities have apprehended 109 people from that time, linked to the significant 2019 PlusToken fraud, and jailed six of the most notorious But, it is uncertain whether the huge numbers of victims who suffered losses in the MTI fraud will obtain some form of compensation.