CFTC Wins Highest Civil Monetary Penalty in Bitcoin Fraud Case

A Texas court has ordered the South African Mirror Trading firm chief to pay a record-breaking $3.4 billion for running a Bitcoin fraud scheme stemming from a case filed by the CFTC.

The commodities regulator brought the charges last year, calling it the largest fraud case in history.

Details of the Judgment

The Federal court has ordered Cornelius Johannes Steynberg to pay defrauded victims $1.7 billion in restitution. Another $1.7 billion was imposed as civil penalties. The Commodity Futures Trading Commission (CFTC) noted it as the highest civil monetary penalty ordered in any commodities case.

In June 2022, the CFTC filed a civil lawsuit against Steynberg and his business, Mirror Trading International. The allegations included running a fraudulent Bitcoin commodity pool worth over $1.7 billion.

Based on the order, the CFTC said in a statement that the executive and the company:

“Is liable for fraud in connection with retail foreign currency (forex) transactions, fraud by an associated person of a commodity pool operator (CPO), registration violations, and failure to comply with CPO regulations.”

Steynberg was dubbed a South African fugitive but was arrested in Brazil under an INTERPOL arrest order that year. Meanwhile, Mirror Trading International is said to be in liquidation.

As per the case filed by the regulator, Steynberg, who led Mirror Trading International (MTI), allegedly engaged in an international fraudulent multilevel marketing scheme.

The case details activities between May 2018 and March 202. The scheme reportedly solicited members of the public for participation in an unregistered commodity pool. The order states that Steynberg accepted at least 29,421 Bitcoins from at least 23,000 individuals in the U.S. and worldwide. The CFTC further notes that the defendants, either directly or indirectly, misappropriated all of the Bitcoin they received from pool participants. In addition, the commodity pool was not registered as a CPO, as required.

Steynberg claimed that MTI traded off-exchange retail forex through a proprietary software program or “bot,” but the order alleges that this was a false claim.

CFTC Goes for Crypto Compliance

The CFTC has taken up several compliance actions in the crypto space. Earlier in March, the regulator filed a complaint against the largest cryptocurrency exchange Binance and its top executives. The case named its co-founder Changpeng Zhao and its former chief compliance officer Samuel Lim. It alleges that Binance actively solicited U.S. users with allegations of insider trading and lax know-your-customer (KYC) norms.

In a recent conversation, former CFTC Chairman Chris Giancarlo said that authorities could successfully interact with cryptocurrencies if they have the motivation to do so.

The former commodities top boss said, “We’re still very much the guardians of an old system.”