The Commodity Futures Trading Commission (CFTC), the US derivatives market industry watchdog, is handling its largest fraud scheme case involving Bitcoin (BTC).
The US regulator announced on Thursday that it has filed a civil enforcement action against a South African man, Cornelius Johannes Steynberg, and an unregistered commodity pool operator, Mirror Trading International Proprietary Limited (MTI).
Both parties were charged with fraud and registration violations before the U.S. District Court for the Western District of Texas.
This action comes a few days after the CFTC slammed a $1.37m fine on Starberry Limited for acting as a futures commission merchant without a permit.
According to the market supervisor, Steynberg, who is a fugitive from South Africa, created and ran a global foreign commodity pool through MTI.
MTI, which was operated on South Africa’s laws, only permitted investors to participate in its pool by paying with BTC, the US derivates market regulator explained.
The commodity pool operator was subsequently able to generate over $1.7 billion from 23,000 investors from the US and more from around the world.
These investors were non-eligible contract participants (ECPs), the CFTC pointed out.
Steynberg alongside Mirror Trading subsequently misappropriated, either directly or indirectly, all of the Bitcoin fund (at least 29, 421 BTC), the CFTC disclosed.
“This action is the largest fraudulent scheme involving Bitcoin charged in any CFTC case,” the US financial industry watchdog said.
More Details on the Case
According to CFTC, between May 2018 and March 2021, Steynberg engaged in “an international fraudulent multi-level marketing scheme.”
Steynberg allegedly used websites and social media to solicit Bitcoin from the public for participation in a pool ran by MTI .
“The commodity pool was controlled by MTI and Steynberg and purportedly traded off-exchange retail foreign currency on a leveraged, margined and/or financed basis with participants who were not eligible contract participants (ECPs) through what the defendants falsely claimed was a proprietary 'bot' or software program,” the CFTC added.
The CFTC urged the District Court to grant full restitution to the scammed investors and order MTI to give up the ill-gotten gains.
Moreover, the market supervisor asked for civil monetary penalties, permanent registration and trading bans as well as permanent injunctions against future violations of the Commodity Exchange Act and the CFTC Regulations.
“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 US regulator warned.
The CFTC pointed out that South
Africa, Belize and Finland’s financial industry regulators as well as the US
Federal Bureau of Investigation’s Southern District of New York Field Office,
among others, assisted in the case.
