A South African fugitive who ran an unregistered commodity pool to defraud unsuspecting victims of foreign exchange and bitcoin has been ordered to pay over $3 billion in restitution and civil monetary penalty.
The judgment marks the largest monetary penalty ever recorded in a CFTC fraud case involving bitcoin.
CFTC’s Biggest Bitcoin Fraudulent Case
A US judge in the District Court for the Western District of Texas ordered Cornelius Johannes Steynberg, a South African fugitive, to pay a penalty of $3.4 billion in a bitcoin fraud case, as stated in a press release by the Commodity Futures Trading Commission (CFTC).
The CFTC stated that Steynberg, founder and CEO of South African company Mirror Trading International Proprietary Limited or MIT, operated a fraudulent multi-level marketing (MLM) business model between 2018 and 2021 to solicit bitcoin from individuals to participate in a commodity pool. However, the CEO and his company ran the commodity pool without registering as a commodity pool operator (CPO) with the CFTC.
As stated in the press release, Steynberg received 29,421 BTC from about 23,000 US individuals and more globally worth $1.7 billion in March 2021, with the CFTC stating that the CEO misappropriated the funds.
The recent court order by Judge Lee Yeakel is based on a complaint filed against the South African CEO in July 2022. Steynberg is to pay a penalty of over $3.4 billion shared equally.
While $1.73 billion will be for restitution to defrauded victims, the other $1.73 billion will be paid as a civil monetary penalty, which the CFTC describes as the “highest civil monetary penalty ordered in any CFTC case,” adding “this action is also the largest fraudulent scheme involving Bitcoin charged in any CFTC case.”
Banned From Engaging With the CFTC
Furthermore, the press release said the South African CEO “is permanently enjoined from engaging in conduct that violates the Commodity Exchange Act (CEA),” cannot register with the regulator, nor trade in any CFTC-regulated markets. Meanwhile, Steynberg, who was hiding from his country’s law enforcement, is under detention in Brazil following an INTERPOL arrest warrant since the end of 2021.
As previously reported by CryptoPotato, the CFTC filed a lawsuit against an ex-Deutsche Bank Investment employee who set up a fraudulent crypto trading fund to collect bitcoin, ether, and fiat from investors.
The regulatory agency also sued crypto exchange giant Binance and its CEO, Changpeng Zhao, for soliciting US customers in contravention of federal laws.