A United States court has ordered a South African citizen to pay over $3 billion in fines for duping American investors through a fraudulent Bitcoin investment scheme.
Cornelius Johannes Steynberg was ordered by a federal judge in the U.S. District Court for the Western District of Texas to pay $1.73 billion in restitution to defrauded victims as well as $1.73 billion in civil monetary penalties, with the total fines coming to over $3.4 billion, according to an April 27 press release by the Commodity Futures Trading Commission (CFTC).
This is the highest civil monetary penalty ever ordered in a CFTC case. It is also the largest fraudulent scheme involving Bitcoin that has been charged in any case by the agency.
The court order arises from a complaint filed by the CFTC on June 30, 2022. According to the order, approximately between May 2018 and March 201, Steynberg and Mirror Trading International Proprietary Limited (MTI), a South Africa-based company that he controlled, engaged in a global fraudulent multilevel market scheme.
The scam solicited Bitcoin from people for participating in an unregistered commodity pool that MTI operated. A commodity pool is a private investment structure that accepts and combines money from investors to trade in commodities and futures markets. It allows individual investors to combine their money and trade in futures contracts as a single entity to gain leverage.
“MTI and Stynberg controlled the commodity pool and purportedly traded off-exchange, retail forex through what they falsely claimed was a proprietary ‘bot’ or software program,” the press release says.
“During this period, Steynberg, individually and as the principal and agent of MTI, accepted at least 29,421 Bitcoin—with a value of over $1,733,838,372 at the end of March 2021—from at least 23,000 individuals in the U.S., and even more throughout the world, to participate in the commodity pool without being registered as a CPO [commodity pool operator] as required.”
Defendants in the case misappropriated all the Bitcoin they accepted from those who participated in the commodity pool.
Recovering Stolen Funds, Banned From CFTC Trading
The CFTC cautioned victims that the court order requiring Steynberg to make payments may not result in the recovery of any lost money since the perpetrator may not have the necessary funds or assets to compensate them.
The order found Steynberg “liable for fraud in connection with retail foreign currency (forex) transactions, fraud by an associated person of a commodity pool operator (CPO), registration violations, and failure to comply with CPO regulations,” the release states.
In addition, Steynberg is permanently enjoined from engaging in any conduct that violates the Commodity Exchange Act (CEA), trading in any market regulated by the CFTC, or registering with the CFTC.
Currently a fugitive from South African law enforcement, Steynberg has been detained in Brazil since December 2021 due to an Interpol arrest warrant.
US Crypto Scams Surging
According to the FBI’s annual Internet Crime Report (pdf), investment scams were the “costliest scheme” reported to the agency’s Internet Crime Complaint Center (IC3) last year. Investment fraud rose from $1.45 billion in 2021 to $3.31 billion in 2022, driven by cryptocurrency investment fraud that jumped 183 percent during this period to $2.57 billion.
“Many victims have assumed massive debt to cover losses from these fraudulent investments and the most targeted age group reporting this type of scam are victims ages 30 to 49,” the report said.
Criminals resort to various schemes to dupe victims, including impersonating celebrities, hacking social media accounts, and using fraudulent liquidity mining applications, among others.
In February, the FBI issued a warning about romance scammers targeting victims with fake crypto investments. In the scam, criminals build relationships with vulnerable social media and dating website users.
Upon gaining the trust of their victims, the perpetrator requests money for false purposes like travel, medical, and legal fees. Criminals also pressure victims to invest in cryptocurrencies.
“Year after year, romance scams result in one of the highest reported financial losses when compared to other Internet-facilitated crimes,” the FBI said, according to a Feb. 13 news release. A total of 19,050 victims reportedly lost over $739 million to romance scammers in 2022.
