Fugitive CEO hit with $3.4 billion fine in record fraud case
While the crypto market has continued to develop, the amount of crypto stolen has increased in recent years and has created a large pool of fraud cases. In a historic ruling, U.S. District Judge Lee Yeakel ordered a South African executive is to pay more than $3.4 billion in restitution and fines for a fraud scheme involving Bitcoin.
Cornelius Johannes Steynberg, founder and CEO of Mirror Trading International Proprietary, was involved in a global “fraudulent multilevel marketing scheme” to solicit Bitcoin from people to participate in an unregistered commodity pool operated by Mirror Trading.
The scheme resulted in the acquisition of at least 29,421 Bitcoins, worth more than $1.7 billion as of March 2021, from at least 23,000 individuals in the United States and from around the world.
However, Steynberg misused all Bitcoin accepted from pool participants either directly or indirectly, according to the US Commodity Futures Trading Commission (CFTC). Despite the US CFTC imposing the fine, it warned that it “may not result in the recovery of lost money because wrongdoers may not have sufficient funds or assets”.
Since late 2021, Steynberg has been in custody in Brazil on an Interpol warrant, as he is a fugitive from South African law enforcement. The CFTC has imposed a permanent ban on Steynberg’s trading activities in all markets that fall under its regulation.
The scheme’s Modus Operandi
Steinberg’s Mirror Trading International Proprietary operated as a Bitcoin investment pool that used bot trading algorithms. The investors would deposit Bitcoin into the pool and in return the pool would generate daily profits from trading on various cryptocurrency exchanges.
However, the CFTC claimed that the bot trading algorithms were fake and were never used to trade cryptocurrencies. Instead, the pool’s funds were used to enrich the pockets of Steynberg and other operators of the scheme.
The US agency further alleged that Steynberg misrepresented the pool’s performance and concealed significant losses it incurred. The funds that the investors received were not from actual trading profits, but from Bitcoin deposited by other investors.
The CFTC also revealed that Steynberg and his associates used a portion of the Bitcoin deposits to acquire assets such as real estate, luxury cars and expensive watches.
Implications of the judgment
The $3.4 billion fine imposed on Steynberg is the largest civil monetary penalty ever in any CFTC case. The size of the fine highlights the seriousness of the fraud and the significant role that Bitcoin played in the scheme.
The ruling may also serve as a warning to other bad actors in the cryptocurrency space, signaling that they cannot avoid legal consequences. However, the CFTC’s warning that the fine may not lead to recovery of lost funds highlights the need for increased regulation in the cryptocurrency industry.
Regulators must strive to ensure that investors are protected from fraudulent schemes and companies must adhere to strict operating standards to avoid fraud.
Meanwhile, Steynberg’s conviction and the massive fine imposed on him may help build confidence in the cryptocurrency space to some extent, as it shows that fraud and other illegal activities in the industry are not immune to legal consequences.
Regardless of the circulating news in the industry, including the big bank First Republic Bank (FRC) collapseshas the crypto market experienced a bullish movement.
In the last 24 hours, the global crypto market cap has risen by 1.4% with the total value exceeding $1.2 trillion.
Featured image from iStock, chart from TradingView
