Bitcoin-related fraud case nets CFTC $3.4B

A judge has imposed a record-breaking $3.4 billion fine in a case brought by a U.S. financial regulator over a Bitcoin-related Ponzi scheme.

In a statement released on April 27, the Commodity Futures Trading Commission reported that Texas District Court Judge Lee Yeakel ordered Cornelius Johannes Steynberg to pay the amount for his role in a fraudulent commodity pool scheme involving foreign currency transactions and Bitcoin.

Steynberg, a South African national and the CEO of Mirror Trading International Proprietary Limited (MTI), a putative trading and networking corporation, was ordered to pay $1.73 billion in restitution to victims and an additional $1.73 billion in a civil monetary penalty.

According to the CFTC, this is the “highest civil monetary penalty ordered in any CFTC case” and the “largest Bitcoin fraud scheme charged in any CFTC case.”

As the head of MTI, Steynberg “engaged in an international fraudulent multilevel marketing scheme to solicit Bitcoin from members of the public for participation in an unregistered commodity pool,” the value of which exceeded $1.7 billion as of March 2021, according to the court order.

From May 2018 to March 2021, the CFTC asserted, he accepted at least 29,421 BTC, valued at more than $1.7 billion at the time but now worth approximately $867 million, from at least 23,000 U.S. and international individuals.

“Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants,” wrote the CFTC.

Steynberg was found liable for fraud in connection with retail foreign currency transactions, fraud by an associated person of a commodity pool operator (CPO), registration violations, and failure to comply with CPO regulations, according to an order issued on April 27.

In addition, Steynberg is permanently prohibited from engaging in conduct that violates the Commodity Exchange Act (CEA).

Additionally, he is permanently prohibited from registering with the CFTC or transacting on any markets regulated by the CFTC.

The CFTC announced on June 30, 2022, that it had filed a civil enforcement action against Steynberg for fraud and registration violations in federal court.

Steynberg initially evaded South African law enforcement and is presently a fugitive; however, he has been detained in Brazil since December 2021 on an INTERPOL arrest warrant.