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South Africa Pushes for Laws to Protect Investors from Ponzi Schemes

South Africa Chainalysis
South Africa Chainalysis

South Africa is one of the countries pioneering the crypto revolution on the African continent. Now, the country’s government is looking to tighten up regulations. However, while most countries look into better regulations due to increased industry activity, the country’s Financial Sector Conduct Authority (FSCA) is moving quickly to protect citizens from criminals.

Making it More Difficult for Ponzi Schemes

Brandon Topham, the FSCA’s head of enforcement, told Bloomberg that the agency was looking to step up its regulation of the country’s crypto space.

In the interview, Topham said the government had seen a significant increase in criminal activity in the industry – especially with the proliferation of Ponzi schemes and scam investment operations. This has got the government shocked and worried at the same time.

“I have been on radio shows where people say, ‘I am a professional Ponzi investor. You get in quick and get out and like with any business you have to risk money to make money.’ We need to make an example of MTI so that people understand that investing in a Ponzi is never a good idea,” the regulatory chief said. 

The MTI Effect

Topham was referring to Mirror Trading International (MTI), a self-proclaimed crypto trading firm that caught several regulators’ attention last year. Last August, the FSCA issued a statement warning members of the public to steer clear of the investment firm.

In its statement, the agency claimed that MTI had said it conducted high-frequency derivatives trades using bots. However, as the agency pointed out, such a business model would require a financial service provider license. MTI doesn’t have one, which is not shocking to anyone.

The FSCA expressed concern about MTI’s business model, with the company claiming to provide up to ten percent in monthly returns. The agency knows such returns are unrealistic. It also cast doubts on the accuracy of the company’s reported balance sheet, which MTI had claimed to be as high as 2.9 billion Rand (about $168 million at the time).

MTI has also gotten in trouble with the Texas State Securities Board (TSSB), which shut its operations down a month earlier after finding out that it duped investors. The TSSB’s allegations included false representations, recruiting unregistered marketers, and conducting what seemed to have been an illegal multilevel marketing (MLM) scheme. 

MTI is just one of the numerous ponzi scams parading as legit opportunities in South Africa. These scams leverage on Bitcoin’s popularity and the lack of knowledge to fleece unsuspecting members of the public. In July 2020, the operator of the VaultAge crypto scam Wille Breedt was declared bankrupt, after stealing over $16 million from thousands of investors in South Africa.

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