The Commodity Futures Trading Commission has charged a South African pool operator and it’s CEO with $1.7 billion fraud scheme involving Bitcoin. This action is the largest fraudulent scheme involving Bitcoin charged in any CFTC case.
A civil enforcement action was filed in the U.S. District Court for the Western District of Texas, charging South Africa national Cornelius Johannes Steynberg and Mirror Trading International Proprietary Ltd. (MTI), a company organized and operated under the laws of the Republic of South Africa, with fraud and registration violations.
According to the CFTC charges, Steynberg created and operated, through MTI, a global foreign currency commodity pool from about May 18, 2018 through about March 30, 2021. Only Bitcoin was accepted to purchase a participation in the pool.
Steynberg and MTI engaged in an international fraudulent multilevel marketing scheme, using the websites www.mirrortradinginternational.au.za, www.mtimembers.com, and www.mymticlub.com. They also used social media to solicit Bitcoin from members of the public for participation in a commodity pool operated by MTI.
They accepted at least 29,421 Bitcoin with a value of over $1.73 billion at that time during the period from about 23,000 participants from the United States, and even more throughout the world without being registered as a commodity pool operator as required. These Bitcoins are currently valued at about $565 million.
The defendants misappropriated, either directly or indirectly, all of the Bitcoin they accepted from the pool participants. Sternberg is a fugitive from South African law enforcement, but was recently detained in the Federative Republic of Brazil (Brazil) on an INTERPOL arrest warrant.
The CFTC is seeking full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and CFTC Regulations.
However, the CFTC cautions victims that restitution orders may not result in the recovery of money lost, because the wrongdoers may not have sufficient funds or assets.
The CFTC was assisted internationally in this case by the South African Financial Sector Conduct Authority, the Financial Services Commission of Belize and the Finnish Financial Supervisory Authority.
They were also assisted by the Texas State Securities Board, the Alabama Securities Commission, the North Carolina Secretary of State-Securities Division, the Mississippi Secretary of State-Securities Division, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Bureau of Investigation’s Southern District of New York Field Office.
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