Liquidators for the insolvent estate of MTI, the bitcoin Ponzi scheme that came crashing down in 2020, have sent out thousands of letters of demand to investors who withdrew funds from the scheme, demanding they repay either the bitcoin or the rand equivalent – but at today’s prices.

When challenged on this interpretation of the Insolvency Act by attorneys Lister & Co, the Master of the Western Cape High Court agreed with the liquidators, reports Moneyweb.

‘We respectfully do not share this view,’ responded attorney John Lister, who is representing more than 400 MTI investors who have received letters demanding repayment of bitcoin.

‘Be that as it may, the application of Section 32(3) by the liquidators in relation to claiming bitcoin or the higher value of bitcoin (which is currently valued at R1.4m as opposed to the average value of R200 000 when it was withdrawn) is causing massive resistance and resentment to such claims amongst investors who innocently invested in MTI and who believe they are being unfairly penalised.’

Lister cites one example of a client who is prepared to pay in the rand value of bitcoin when it was withdrawn in an amount of R57 000. Instead, the liquidators demanded he repay the bitcoin at today’s price of R310 000. 

If this reading of the Insolvency Act is allowed to stand, it means many MTI investors are at risk of bankruptcy, says Lister. Lister and his clients are relying on a 2023 judgment in the Western Cape High Court by Acting Judge Alan Maher, who issued a directive that any MTI member 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.

But the Master of the Cape High Court agrees with the liquidators that Lister’s reliance on the Maher judgment is wrong and that the liquidators are not bound by it, according to Moneyweb.

In a letter to the Master, the liquidators say Lister failed to consider other parts of the Maher judgment ‘where the judge explicitly states his understanding that the relief sought through directions is not intended to be final and binding.

However, the liquidators say they appreciate the predicament of investors who no longer have the bitcoin received from MTI. 

The demand for repayment of bitcoin is for the benefit of the body of creditors, even if this seems harsh, unjust, unreasonable and unimaginable to them, say the liquidators.

The liquidators say they have developed guidelines to assist in the settlement of claims for less than the amount demanded.

This will require disclosure of the investor’s financial means on a without-prejudice basis.

Full Moneyweb report