South African regulators want more control over cryptocurrency trading. This comes after the collapse of what was allegedly the largest Ponzi scheme the country has ever seen.
Self-proclaimed bitcoin (BTC) trading firm Mirror Trading International was put into provisional liquidation in December as investors tried and failed to withdraw their funds. The company claimed to have attracted more than 260,000 members worldwide, reportedly handling 23,000 bitcoins – a sum currently worth in the region of $716 million.
An investigation by the Financial Sector Conduct Authority revealed that the company did not maintain any accounting records or any user database. Company executives claimed they were misled by CEO Johann Steynberg, who they say may have fled to Brazil.
Lawyers for the remaining company executives stressed that the FSCA had not yet concluded that MTI was operating as a Ponzi scheme, only that it was operating without a license.
FSCA chief Brandon Topham told Bloomberg that law enforcement must be able to stop such schemes before they gain momentum. To that end, the body is making requests to formally regulate the trading of cryptocurrencies such as Bitcoin (BTC), Topham said. Topham said attempts at early entry into Ponzi schemes have become a fairly common practice in South Africa
In July, the Texas State Securities Board shut down MTI operations taking place in its jurisdiction after finding that the project was a multi-level marketing scheme. South African regulators were already suspicious of MTI’s claims that it would return 10% of profits per month for each user.
In December, Coinbase CEO Brian Armstrong said the U.S. Treasury Department was proposing regulations that could make exchanges require a name and physical address for users involved in any cryptocurrency transaction worth more than $3,000.