CFTC wins a record $3.4B penalty payment in a Bitcoin-related fraud case

CFTC wins a record $3.4B penalty payment in a Bitcoin-related fraud case

By Charles Thuo - min read
  • This is the largest fraud case involving Bitcoin that CFTC has cracked so far.
  • The case involved the CEO of Mirror Trading International Proprietary Limited (MTI).
  • Half of the $3.4B will go toward providing restitution to victims of MTI’s fraudulent activities.

A Texas court has ordered Johannes Steynberg, the CEO of Mirror Trading International Proprietary Limited (MTI) to pay a $3.4 billion penalty in connection with a large-scale fraud case involving Bitcoin.

According to the CFTC allegations, Steynberg engaged in an international fraudulent multilevel marketing scheme (MLM) to ask for bitcoins from the public for an unregistered commodity pool operated by the South Africa-based company MTI.

Steynberg who was controlling MTI and the company falsely claimed to trade off-exchange retail forex through a proprietary “bot” or software program between May 2018 and approximately March 2021.

The final judgment read:

“Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants.”

According to the CFTC Steynberg, individually and as the principal and agent of MTI, accepted at least 29,421 bitcoins, valued at over $1.7 billion at the time. The bitcoin was obtained from at least 23,000 individuals in the US and other countries around the world. The individuals were tricked to participate in the commodity pool although MTI was not registered as a commodity pool operator (CPO), as required by the law.

Steynberg arrest

Steynberg was arrested in December 2021 and has been held in Brazil on an Interpol arrest warrant since then.

Besides the recent charges against him by the CFTC, Steynberg is also permanently banned from registering with the CFTC or trading in any CFTC-regulated markets.

Restituting MTI’s victims

Half of the $3.4 billion penalty will go towards providing restitution to the victims of MTI’s fraudulent activities. The other half is a civil penalty, which is the highest civil penalty to be ordered in any CFTC case.

The CFTC has however conceded that “orders requiring payment of funds to victims may not result in the recovery of any money lost because wrongdoers may not have sufficient funds or assets.”