The U.S. Commodities Regulator disclosed on Thursday it had filed civil charges against a South African man and his company for operating a fraudulent commodity pool worth more than $1.7 Billion in bitcoin.
The Commodity Futures Trading Commission (CFTC) said the fraud scenario, which saw the firm solicit bitcoin online from thousands of people to run a commodity pool, was the hugest it had ever pursued involving the cryptocurrency. The Commodity Futures Trading Commission filed the charges against Cornelius Johannes Steynberg and Mirror Trading International Proprietary Limited (MTI), accusing them of fraud and registration violations.
The accusations against Steynberg and MTI are the latest actions taken by the CFTC, which said in May that it was adding resources to monitor the crypto market.
CFTC’s Allegation about Steynberg
Earlier this month, the CFTC accused Gemini Trust Company LLC, better known as Gemini, of allegedly misleading regulators in 2017. The CFTC says the cryptocurrency exchange made “material false or misleading statements” to gain approval for its Bitcoin futures product.
Today’s declared action comes on the same day the U.S. Department of Justice announced charges in four NFT “rug-pull” cases that could have cost victims over $100 million.
Steynberg had been a fugitive from South African law enforcement but was recently jailed in Brazil on an INTERPOL arrest warrant, the CFTC disclosed. He could not be immediately interviewed.
The complaint charged Steynberg with engaging in an international fraudulent multilevel marketing (MLM) scheme that generated 29,421 BTC, worth over $1.7 billion. The agency says Steynberg also used his company MTI in the scheme, which ran for almost three years, from May 18, 2018, through March 30, 2021.
The CFTC said in its complaint that the company declared to have proprietary software that would realize substantial trading gains for investors who pooled their bitcoin with it, but in reality, such doesn’t exist.
Only a small portion of the pooled bitcoin was ever invested at a loss, and the rest was “misappropriated,” according to the CFTC. The Company ultimately filed for bankruptcy in 2021, shortly after which South African authorities launched a fraud investigation.
The CFTC said approximately 23,000 Americans invested in the pool. The civil action was entered at the U.S. District Court for the Western District of Texas.
“The little trading that Defendants did was unprofitable, and they misappropriated essentially all of the at least 29,421 Bitcoin accepted from participants,” said CFTC Commissioner Kristin Johnson in a press release. “Fraudsters often take full advantage of new technology, global connectivity, and perceived lack of a cop on the beat to perpetrate their scams.”
While the CFTC says it is seeking full compensation for investors, the agency cautions victims that restitution orders may not result in the recovery of total money lost.
