The Financial Sector Conduct Authority (FSCA), the country’s top financial market regulator, is now proposing to regulate all digital currencies following the growing interest in such assets and the rampant fraudulent schemes, according to a Bloomberg report.
The market watchdog already made proposals earlier to bring regulations to the cryptocurrency market, but none of those earlier attempts has materialized. As a result, the wild crypto market in the country has continued to be unregulated, spawning many fraudsters luring investors with promises of high-interest rates.
Largest Ponzi Scheme
The latest attempt to regulate the crypto market came after the notorious Mirror Trading International (MTI) defrauded around 28,000 investors, becoming South Africa’s largest Ponzi scheme.
Finance Magnates earlier reported on the fraud conducted by MTI after collecting around 23,000 Bitcoins, now worth around $740 million from investors around the world. The scheme made extremely lucrative offers like at least a 10 percent monthly return on investments.
A South African court last month granted a provisional liquidation order against MTI, but the revelation made by the liquidators was also shocking. The company did not maintain any books of its accounts, neither did it keep details of its clients. Only a list of 170,000 unique email addresses was recovered in a raid last October.
The Ponzi scheme’s mastermind and Chief Executive, Johann Steynberg fled the country, and no one now knows his whereabouts.
Additionally, MTI’s management put the blame on Steynberg, saying he misled them.
“At the point something becomes a Ponzi scheme, we have lost our jurisdiction,” FSCA Enforcement Head, Brandon Topham, told the publication. “We need the police and the prosecuting authority to work fast and put people in jail.”
Before the South African government’s warning against MTI, regulators in Texas and Canada already flagged the company for pulling out Ponzi schemes.
If the South African watchdog finally manages to regulate the wild cryptocurrency market this time, it is to be seen if the framework will be crypto-friendly or only curb the industry.