Cornelius Johannes Steynberg, a South African fugitive, has been ordered by the US District Court for the Western District of Texas to pay over $3 billion in restitution and civil monetary penalty. This is in relation to a bitcoin fraud case where Steynberg ran an unregistered commodity pool using a fraudulent multi-level marketing (MLM) business model to solicit bitcoin from unsuspecting victims.
Steynberg misappropriated the funds and received 29,421 BTC from about 23,000 US individuals and more globally worth $1.7 billion in March 2021. According to the Commodity Futures Trading Commission (CFTC), this is the largest fraudulent scheme involving Bitcoin charged in any CFTC case. 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 with $1.73 billion going to the victims as restitution, and the other $1.73 billion as a civil monetary penalty, which is the highest civil monetary penalty ordered in any CFTC case.
Steynberg’s Prohibition from the CFTC
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. It is worth noting that Steynberg was hiding from his country’s law enforcement and was under detention in Brazil following an INTERPOL arrest warrant since the end of 2021.
Additionally, the CFTC has taken similar actions against other fraudulent crypto-related schemes, including an ex-Deutsche Bank Investment employee who set up a fraudulent crypto trading fund and crypto exchange giant Binance whose CEO, Changpeng Zhao, solicited US customers in contravention of federal laws.