In a lawsuit brought by a US financial regulator involving a fraudulent scheme involving Bitcoin, a judge handed down a record-breaking $3.4 billion penalty. The Commodity Futures Trading Commission (CFTC) said in an April 27 statement 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 purported trading and networking company, was ordered to pay defrauded victims $1.73 billion in restitution and a $1.73 billion civil monetary penalty. According to the CFTC, this is the “highest civil monetary penalty ordered in any CFTC case” as well as “the largest fraudulent scheme involving Bitcoin charged in any CFTC case.”
According to the order, Steynberg, as the CEO of MTI, “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 was more than $1.7 billion as of March 2021.
The CFTC claimed he accepted at least 29,421 BTC valued at more than $1.7 billion at the time — but now worth approximately $867 million — from 23,000 individuals in the United States and even more globally between May 2018 and March 2021. “Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants,” according to 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 the April 27 order.
Steynberg is also permanently barred from engaging in conduct that violates the Commodity Exchange Act (CEA). He is also barred from registering with the CFTC or trading in any CFTC-regulated markets for the rest of his life.
On June 30, 2022, the CFTC announced that it had filed a civil enforcement action against Steynberg in federal court for fraud and registration violations. Steynberg initially fled South African law enforcement and is currently a fugitive, but he has been detained in Brazil since December 2021 on an INTERPOL arrest warrant.