On April 27, a Texas District Court Judge ordered South African CEO Cornelius Johannes Steynberg to pay a record-breaking penalty of $3.4 billion. The punishment was handed down in a lawsuit brought about by the US Commodity Futures Trading Commission (CFTC) involving a fraudulent scheme involving Bitcoin (BTC).
The CFTC accused Steynberg, who was CEO of Mirror Trading International Proprietary Limited (MTI), a purported trading and networking company, of engaging in an international fraudulent multilevel marketing scheme. The scheme was aimed at soliciting Bitcoin from members of the public for participation in an unregistered commodity pool. According to the CFTC, Steynberg accepted at least 29,421 BTC valued at more than $1.7 billion. These Bitcoins were accepted from 23,000 individuals in the US and even more globally.
The fraudulent scheme, which operated from May 2018 to March 2021, had a value of over $1.7 billion as of March 2021. The CFTC alleged that Steynberg, either directly or indirectly, misappropriated all of the Bitcoin that was accepted from the pool participants.
The CFTC’s lawsuit against Steynberg is the largest fraudulent scheme involving Bitcoin charged in any CFTC case, and the highest civil monetary penalty ordered in any CFTC case. Of the $3.4 billion penalty, $1.73 billion is restitution to defrauded victims, while an additional $1.73 billion is a civil monetary penalty.
In addition to the monetary penalty, the court found Steynberg 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. Furthermore, Steynberg is permanently prohibited from engaging in conduct that violates the Commodity Exchange Act (CEA). He is also permanently banned from registering with the CFTC or trading in any CFTC-regulated markets.
The CFTC’s civil enforcement action against Steynberg was initially filed in federal court for fraud and registration violations on June 30, 2022. Steynberg fled from South African law enforcement and was a fugitive until his detention in Brazil on an INTERPOL arrest warrant in December 2021.
The severity of the penalty handed down to Steynberg highlights the CFTC’s determination to hold individuals accountable for fraudulent schemes involving cryptocurrencies. The penalty serves as a warning to other unscrupulous individuals that they will not get away with malicious actions involving cryptocurrency.
The proliferation of cryptocurrencies has increased the likelihood of fraud and misconduct, as the unregulated and decentralized nature of cryptocurrency provides an attractive environment for fraudsters. The CFTC has been increasingly vigilant in cracking down on fraudulent schemes and illicit activities involving cryptocurrencies.
In conclusion, the $3.4 billion penalty handed down to Steynberg by the CFTC should send a strong message to individuals involved in fraudulent schemes that cryptocurrency is not a safe haven. The CFTC’s increasing efforts to root out fraudulent schemes involving cryptocurrencies demonstrate its commitment to ensuring a fair and transparent marketplace for all. The proliferation of cryptocurrencies has undeniably fueled many fraudulent schemes, but it is reassuring to know that regulators like the CFTC are taking necessary steps to protect consumers and hold fraudsters accountable.