The Financial Sector Conduct Authority's investigation into Mirror Trading International (MTI) is near completion and a criminal case has been opened with the South African Police Services, the regulator said on Thursday.
FSCA found that MTI was not licensed to conduct financial services and had not applied for such a licence, it said.
"The Authority believes that MTI and its senior management are conducting an illegal operation, misleading clients and have contravened several laws," read the statement.
In August, the regulator recommended clients withdraw funds from MTI as it was being investigated. Authorities in Texas had in July ordered MTI to stop trading in the US State after the company was fingered as a "multi-level marketing get rich quick-scheme".
The FSCA said it had told MTI in October that it was conducting illegal unregistered financial services business, but MTI responded with a claim that it had changed its trading activities to trade in derivative instruments based on cryptocurrency - Bitcoin. This would mean that it no longer fell within the jurisdiction of the FSCA, and that it no longer required a financial services provider licence.
According to the FSCA, this was not true, however, as the submissions received from CEO Cornelius Johannes Steynberg revealed that the crypto was allegedly traded in the form of a derivative product, which would have required registration with the FSCA as well.
In October the FSCA obtained search and seizure warrants and executed them at the homes of Steynberg and Marks, and the offices of MTI. It said it found "no evidence of any significant store of crypto assets on any trading platform" and that most crypto balances appeared in the name and under control of Steynberg.
"The amount of such balances is well below the advertised balance on the MTI trading platform as being due to investors of MTI", the FSCA said, adding that it had received complaints that investors could not redeem their investments.
Mirror Trading previously told Fin24 that the matter was "under control" and that it was dedicated to resolving the issue. A post on its Facebook page refers to "malicious reports and unsubstantiated claims made by people that want to see MTI fail".
The investigation is ongoing.