MTI investors fight back against liquidators’ demands for repayment

Mirror Trading International (MTI) investors are fighting back against demands from the liquidators that any bitcoin withdrawn from the Ponzi scheme be repaid, but at today’s prices.

Investors are lawyering up and resisting demands from the liquidators for repayment.

Read: Good news and bad news for MTI investors

In a letter to the Master of the Cape High Court, attorney John Lister of Lister & Company says he acts for about 415 investors who are being sued by MTI liquidators for the return of bitcoin withdrawn from the scheme, or if that’s not possible, the return of the equivalent value in rands – but at today’s prices.

Moneyweb recently reported on the case of Ben Janse van Vuuren who invested R20 000 in MTI in July 2020, but withdrew his funds, then worth R21 000, a few months later when he suspected he may be involved in a scam.

Read: Liquidators claim R97 000 from MTI investor who thought he’d dodged a bullet

The amount involved in this case was 0.13 bitcoin. The price of bitcoin has shot up since 2020, which meant Van Vuuren would have to pay the liquidators R97 000.

Van Vuuren, like hundreds of other MTI investors in a similar position, has lawyered up.

Two lawyers contacted by Moneyweb believe the MTI liquidators are wilfully misreading the Insolvency Act for their own ultimate benefit.

The longer and more numerous the court cases, the more income they stand to make.

One issue both lawyers have with the liquidators’ reading of the Insolvency Act is that the courts have yet to make a ruling on the factual insolvency of MTI. The Supreme Court of Appeal ruled that repayment of an investor’s capital did not constitute a “disposition without value”.

In April 2023, the Cape High Court ruled that MTI was an illegal scheme and all agreements between the company and investors were void from the outset.

In that case, Acting Judge Alma de Wet refused to rule that MTI was factually insolvent, and that any dispositions made by MTI preferred one or more creditors over the others – as was requested by the liquidators.

Three classes of MTI investors

In another case before the Cape High Court in November 2023, Acting Judge Alan Maher divided MTI investors into three classes:

1. Those who invested in the scheme and received nothing in return;
2. Those who withdrew less than they invested in the scheme; and
3. Those who withdrew more than they invested, thereby profiting in the scheme.

The first class of investors – those who invested and received nothing in return – should be permitted to submit a claim against the MTI estate equal to their investment. This should be calculated in rands as at the date of the investment.

The second class – those who withdrew less than they invested – would have to account to the liquidators for any returns received, and any benefit received would reduce the size of their claim against MTI. Again, Acting Judge Maher ruled that the investments be calculated in rands on the date of investment and the date of withdrawal.

The third class – those who withdrew more than they invested – would not have a claim against MTI, and liquidators would have a claim for the repayment of profits received, calculated in rands on the date of receipt.

Legal argument

Lister argues that the liquidators have opted to demand repayment of bitcoin, or the rand equivalent in today’s prices, based on Section 32(3) of the Insolvency Act, which allows for the recovery of property at the date of disposition or the setting aside of the disposition, whichever is the higher.

However, this section of the act is irrelevant in this case because of the Maher judgment (explained above), says Lister.

“The Court expressly directed in this regard that any reimbursements to an investor and/or profit received should be calculated in the rand value as at the date upon which the relevant investor received such reimbursement/payment from MTI,” writes Lister to the Cape High Court master.

Class 2 and 3 investors are up in arms, and correctly argue that they are being penalised and treated unfairly, adds Lister. This also raises constitutional issues.

The case of Van Vuuren is illustrative of the prejudice that MTI investors are likely to suffer. His 0.13 bitcoin, worth R20 000 in July 2020, is today worth an equivalent of R122 000, based on a bitcoin price of R940 000.

Should bitcoin rise to R3 million in the future, he will be asked to repay R366 000.

What Van Vuuren says he is willing to do is repay the actual profit received, which was R1 000 – the difference between the R20 000 he deposited and the R21 000 he received back.

Another investor, another demand

In another example, an MTI investor received a demand from liquidators for R62 137, equivalent to the 0.07 bitcoin withdrawn from the scheme in 2020.

The 0.07 bitcoin was worth R12 000 at the time. This was less than the R28 000 the investor deposited into MTI, which places her in the Class 2 category.

“She is a net loser to the extent of R16 000 but is now expected to pay R62 137 …” writes Lister.

He goes on to say that according to the liquidators’ advice, this would mean “she can only claim R28 000 once she has made such payment”.

“By demanding investors repay bitcoin at today’s prices, what the liquidators are effectively doing is getting investors to pay creditors with other people’s money, reminiscent of the very evil that [acting judges] De Wet and Maher declared unlawful,” says Lister.

Where to now …

Lister is asking the master of the court to withdraw “section 32(3) claims” from the equation as this will prevent unnecessary litigation and allow for a more equitable settlement.

“Clearly, if nothing is done to stop this process immediately, an appropriate interdict would be justifiable against the liquidators, but this would not be a preferred route and this issue needs to be resolved constructively,” adds Lister.

Herman Bester, one of the MTI liquidators, told Moneyweb earlier this month that the liquidators are empowered by sections 26 and 32 of the Insolvency Act to demand repayment of any withdrawals from MTI as it was last year declared an unlawful Ponzi scheme in the Western Cape High Court. That means that any agreements between the company and investors were void from the outset.

Therefore, any withdrawals from MTI are considered ‘dispositions without value’ in terms of the Insolvency Act and must be repaid.

Bester also clarified that Van Vuuren would be required to repay R97 000 to the MTI estate, but could lodge a claim against the estate for the full R97 000. His claim would then be pooled with thousands of other claims, which would be paid out a pro rata dividend once expenses in the liquidation had been settled.

Lister and hundreds of others clearly see it differently and appear ready to go to court to test their arguments.