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CFTC wins record $3.4B penalty payment in Bitcoin-related fraud case

CFTC wins record $3.4B penalty payment in Bitcoin-related fraud case

A record-breaking $3.4 billion penalty has been ordered by Texas District Court Judge Lee Yeakel in a lawsuit brought by the Commodity Futures Trading Commission (CFTC), involving a fraudulent scheme that included Bitcoin (BTC).

The CFTC’s April 27 statement revealed that the penalty is related to the fraudulent commodity pool scheme perpetuated by Cornelius Johannes Steynberg, the CEO of Mirror Trading International Proprietary Limited (MTI), a company that claimed to be involved in trading and networking.

Steynberg, a South African national, was ordered to pay restitution of $1.73 billion to defrauded victims and an additional $1.73 billion civil monetary penalty for his role in the fraudulent scheme involving foreign currency transactions and Bitcoin.

This penalty is deemed to be the highest civil monetary penalty ever ordered in any CFTC case and the largest fraudulent scheme involving Bitcoin charged in any CFTC case.

The court order stated that Steynberg, as the head 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” with the total value exceeding $1.7 billion as of March 2021.

Between May 2018 and March 2021, the CFTC alleged that Steynberg accepted at least 29,421 BTC valued at over $1.7 billion at the time (now worth about $867 million) from over 23,000 individuals in the US and globally. The CFTC wrote, “Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants.”

The CFTC 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. The order also permanently prohibits him from violating the Commodity Exchange Act (CEA), registering with the CFTC, or trading in any CFTC-regulated markets.

On June 30, 2022, the CFTC filed a civil enforcement action in federal court for fraud and registration violations against Steynberg, who fled from South African law enforcement and is currently a fugitive but has been detained in Brazil on an INTERPOL arrest warrant since December 2021.

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