Benzinga - A South African businessman was ordered to pay a record $3.4 billion penalty after a U.S. judge agreed with the Commodity Futures Trading Commission that it had engaged in a multilevel marketing scam to solicit bitcoin from members of the public.
Cornelius Johannes Steynberg, the founder and CEO of Mirror Trading International (MTI), was ordered to pay a $1.7 billion fine and $1.7 billion in restitution to defrauded victims — who included U.S. citizens. The sum is the highest-ever civil monetary penalty awarded for a case involving the CFTC.
The order, entered by Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, found that Steynberg committed fraud tied to retail foreign-currency transactions, among other violations.
Steynberg, a fugitive from South African law enforcement, has been in custody in Brazil since December 2021 on an Interpol arrest warrant, the CFTC said. The regulator has permanently banned him from trading in any CFTC-regulated markets. MTI is currently in liquidation in South Africa.
The CFTC first charged Steynberg with fraud in June 2022.
Soliciting bitcoin scam From at least May 2018 through at least March 2021, Steynberg, individually and as the "controlling person" of MTI, engaged in an international fraudulent multilevel marketing scheme — using the websites mtimembers.com, mirrortradinginternational.au.za and mymticlub.com in addition to social media — to solicit bitcoin from the public for participation in a commodity pool operated by MTI, according to the CFTC.
The pool allegedly engaged in off-exchange, retail forex trading using leverage, margin and financing through a proprietary software program.
Steynberg accepted at least 29,421 bitcoin (worth around $1.7 billion at the end of the relevant period) from at least 23,000 U.S. participants and even more throughout the world without being registered as an associated person of a commodity pool as required by federal law, the regulator said. MTI had never been registered with the CFTC in any capacity either, according to the regulator.
"Either directly or indirectly, the defendants misappropriated all of the bitcoin they accepted from pool participants," the CFTC said.
Though the CFTC slapped Steynberg with a record fine, it cautioned 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."
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