CFTC Charges South African Pool Operator and CEO with $1.7 Billion Fraud Involving Bitcoin

NEWS
Published
Jun 30th '22
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This action is CFTC’s (Commodity Futures Trading Commission) largest fraud scheme case involving Bitcoin.

 

The CFTC filed a civil enforcement action in the U.S. District Court for the Western District of Texas, charging Cornelius Johannes Steynberg of Stellenbosch, Western Cape, Republic of South Africa and Mirror Trading International Proprietary Limited (MTI), a company organized and operated under the laws of the Republic of South Africa, with fraud and registration violations. Steynberg created and operated, through MTI, a global foreign currency commodity pool that only accepted Bitcoin to purchase a participation in the pool, with a value of over $1,733,838,372. This action is the largest fraudulent scheme involving Bitcoin charged in any CFTC case.

 

In its continuing litigation, the CFTC seeks 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. 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.

 

Case Background

The complaint charges that from approximately May 18, 2018 through approximately March 30, 2021, Steynberg, individually and as the controlling person of MTI, engaged in an international fraudulent multilevel marketing scheme, using the websites www.mirrortradinginternational.au.za, www.mtimembers.com, and www.mymticlub.com, in addition to social media, to solicit Bitcoin from members of the public for participation in a commodity pool operated 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. During this period, Steynberg, individually, and as the principal and agent of MTI, accepted at least 29,421 Bitcoin—with a value of over $1,733,838,372 at the end of the period—from approximately 23,000 non-ECPs from the United States, and even more throughout the world, to participate in the commodity pool without being registered as a commodity pool operator as required. 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 appreciates the assistance of the South African Financial Sector Conduct Authority, the Financial Services Commission of Belize, the Finnish Financial Supervisory Authority, 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.

 

Division of Enforcement staff members responsible for this case are Timothy J. Mulreany, Danielle Karst, George Malas, and Paul G. Hayeck.

 

Source: CFTC