The U.S. Commodity Futures Trading Commission (CFTC) has imposed $1.7 billion in restitutions against a South African BTC scam in the agency’s largest fraud scheme case involving digital assets.
A court in the Western District of Texas ordered Mirror Trading International (MTI) to pay $1.733 billion in restitution, concluding an action the CFTC lodged in June last year.
MTI allegedly solicited investment from thousands of investors, over 23,000 of whom were from the U.S. Operating a multi-level marketing scam, the company raised 30,000 BTC from investors. It promised them guaranteed profits, which it claimed came from proprietary trading practices that ‘never made any losses.’
However, as with most other BTC scams, the money never went to trading. Instead, founder Cornelius Johannes Steynberg and other co-conspirators channeled the money to their personal expenses. They also used some funds from late-stage investors to make interest payments to early investors in a Ponzi scheme fashion.
Steynberg misled investors on the level of his expertise in forex and BTC trading, the CFTC alleged. He also left out critical information about other executives, including that three of them had filed for bankruptcy protection in the United States.
In his comments, CFTC’s Director of Enforcement Ian McGinley said that the agency would continue to pursue criminals who hide behind the guise of digital assets and other emerging technologies.
“Whether a scam involves fictitious electronic trading ‘bots’ or Bitcoins, as this action involving a South African entity shows, we will pursue the scam artists wherever they may be,” he said.
Regulators globally have pursued Steynberg and his company for years. In 2020, South African authorities placed the company into involuntary liquidation and appointed liquidators to handle the process. The bankruptcy proceedings are still ongoing before the High Court of South Africa.
In her statement, Commissioner Kristin Johnson lauded the CFTC’s continued cooperation with local and global regulators to crack down on crime in digital currency and beyond. She also called on vigilance from investors in light of more complex scams.
“Fraudsters offering guaranteed, or unusually high, returns—or both—should in particular prompt scrutiny and additional diligence before transferring any funds,” she said.
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