South African national and CEO of Mirror Trading International Proprietary Limited (MTI), Cornelius Johannes Steynberg, has been ordered to pay a record-breaking $3.4 billion penalty in a lawsuit brought by the US financial regulator, the Commodity Futures Trading Commission (CFTC). The penalty comes as a result of Steynberg’s role in a fraudulent commodity pool scheme involving foreign currency transactions and Bitcoin.
The CFTC stated that the scheme perpetrated by Steynberg was “the largest fraudulent scheme involving Bitcoin charged in any CFTC case”. Steynberg was found liable for fraud in connection with retail foreign currency transactions, fraud by an associated person of a commodity pool operator, registration violations, and failure to comply with CPO regulations.
Steynberg was also ordered to pay $1.73 billion in restitution to defrauded victims and an additional $1.73 billion civil monetary penalty. This is the “highest civil monetary penalty ordered in any CFTC case”, according to the regulator.
The CFTC alleged that between May 2018 and March 2021, Steynberg accepted at least 29,421 BTC valued at more than $1.7 billion from 23,000 individuals in the US and globally. The CFTC wrote that “either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants”.
The consequences of this fraudulent scheme could have a negative impact on the crypto sector and the metaverse, as regulators are likely to increase their scrutiny on cryptocurrencies and their related platforms. Investors could also become more hesitant to invest in the crypto sector due to fear of fraudulent schemes.
The CFTC’s Director of Enforcement, Vincent McGonagle, warned investors to be wary of schemes that promise unrealistic returns. “This case shows that the CFTC will continue to work diligently to root out fraudulent schemes, particularly those involving Bitcoin and other digital assets,” he added. Steynberg is currently a fugitive and has been detained in Brazil on an INTERPOL arrest warrant since December 2021.