Mirror Trading liquidators survive strike-out bid in English bitcoin clawback claims

The High Court has refused to strike out claims brought by the South African liquidators of Mirror Trading International (Pty) Ltd (MTI), allowing them to continue English proceedings seeking to recover bitcoin transfers allegedly made through the collapsed cryptocurrency Ponzi scheme.

Justice Leech dismissed an application by Eugene Pienaar, the 54th respondent, who argued that the liquidators’ claims were prescribed under South African law, amounted to an abuse of process and should be struck out for disclosure failures. The Court also granted the liquidators further time to comply with directions and permission in principle to rely on additional expert evidence, although some case management issues were adjourned for a further hearing.

MTI was a South African cryptocurrency investment platform that began trading in April 2019 and allegedly solicited bitcoin from the public by promising unrealistic returns of 0.5% per day or 10% per month. The South African Financial Sector Conduct Authority later found that MTI was engaged in a pyramid and Ponzi scheme, and the Western Cape High Court has held that MTI’s business was an unlawful and fraudulent scheme.

The company was placed into liquidation after a creditor applied to wind it up in December 2020. Provisional liquidators were appointed in January 2021, with further appointments made in November 2021 and April 2023. The English Court later recognised the liquidators under section 426 of the Insolvency Act 1986 following a letter of request from the South African Court.

The claims form part of a wider recovery effort against recipients of bitcoin from MTI. The liquidators allege that individuals in the UK, South Africa, Australia, the US and elsewhere received bitcoin either as purported returns on deposits or as referral fees. Their pleaded case is that approximately 8,624 individuals who resided in the UK at registration appeared to be UK bitcoin recipients, though the liquidators resolved to pursue claims against a narrower group of respondents.

The liquidators seek relief under South African clawback provisions dealing with dispositions without value, voidable preferences and undue preferences, and also plead alternative English law claims under sections 238 and 239 of the Insolvency Act 1986. Against Pienaar, the pleaded South African claims were valued at approximately R254,285 under section 26 and approximately R1.59 million under each of sections 29 and 30.

Pienaar’s main strike-out argument was that the claims were already extinguished by prescription under South African law. The liquidators answered that time did not begin to run until they had actual knowledge of his name and address, which they pleaded as 20 December 2023, and alternatively that they could not reasonably have identified MTI debtors and analysed the relevant data before 1 June 2022 because of the complexity of MTI’s “MAXTRA” database and the need to develop bespoke software known as MARS.

Justice Leech held that the liquidators had a good arguable case on prescription and that the issue was unsuitable for summary disposal. The Court accepted, for strike-out purposes, expert evidence that South African prescription did not begin to run until the creditor had actual knowledge of the debtor’s name and residential address, and found that disputed issues around knowledge, database access and reasonable diligence required factual and expert evidence at trial.

The Court also refused to strike out the alternative English law claims. Although Justice Leech expressed some surprise at the proposition that the liquidators could still seek relief under sections 238 and 239 if the South African claims failed, he held that they had a real prospect of success on the point, including on the scope of the English Court’s powers under section 426.

Pienaar’s abuse of process arguments also failed. He alleged that the liquidators and their solicitors had adopted inconsistent positions in England and South Africa, misled the South African Court on prescription and costs, and improperly pursued the English proceedings. Justice Leech rejected those arguments, finding no collateral attack, no conduct corrupting the English trial process and no basis to strike out the claims. The Court noted that inconsistent or alternative positions do not, without more, amount to an abuse before judgment.

The disclosure-based strike-out argument was likewise dismissed. The Court held that the prior case management order did not impose an automatic sanction and that the provision allowing the parties to agree a 28-day extension did not permanently prevent further court-approved extensions. Because the liquidators applied before the extended deadline expired, the Denton relief from sanctions framework did not apply.

On directions, the Court granted extensions of time, vacated the November 2026 trial date and allowed further expert evidence in principle. Justice Leech accepted that expert evidence on MTI’s insolvency, bitcoin valuation and forensic accounting would assist the trial judge, even though he had sympathy for Pienaar’s concern that the additional evidence would increase cost and delay.

The decision keeps alive an important cross-border insolvency recovery claim involving cryptocurrency transfers, foreign clawback law and the use of section 426 to assist South African officeholders in England.

Read the decision here.

Charlotte Cooke and Rabin Kok of South Square (instructed by Farrer & Co) appeared on behalf of the liquidators.