Fugitive CEO Ordered to Pay $3.4 Billion in Record Fraud Case Involving Bitcoin

Olga Kharif, Bloomberg News

Lights illuminate USB cables inside a 'mining rig' computer, used to mine cryptocurrency, in Budapest, Hungary, on Wednesday, Jan. 31, 2018. Cryptocurrencies are not living up to their comparisons with gold as a store of value, tumbling Monday as an equities sell-off in Asia extended the biggest rout in global stocks in two years. Photographer: Akos Stiller/Bloomberg , Bloomberg

(Bloomberg) -- A US judge ordered a South African executive to pay more than $3.4 billion in restitution and fines for a fraud scheme involving Bitcoin — the highest-ever civil monetary penalty in any US Commodity Futures Trading Commission case.

Cornelius Johannes Steynberg, the founder and chief executive officer of Mirror Trading International Proprietary, committed fraud tied to retail foreign-currency transactions, among other violations, the agency said in a statement that announced the order by US District Judge Lee Yeakel.

The scam ensnared investors from the US to Canada, Namibia and South Africa, where the Financial Sector Conduct Authority put MTI under provisional liquidation in December 2020. The hunt for the company’s CEO began in earnest when the management of MTI, which claimed to have 260,000 members, said in a letter posted on Telegram that they were misled and that Steynberg may have fled to Brazil.

Between 2018 and 2021, Steynberg took part in a global “fraudulent multilevel marketing scheme” to solicit Bitcoin from people for participation in an unregistered commodity pool operated by Mirror Trading, according to the CFTC.

He solicited at least 29,421 Bitcoin — worth more than $1.7 billion in March 2021 — from at least 23,000 individuals in the US and more from around the world, for participation in an unregistered commodity pool that his company operated.

“Either directly or indirectly, the defendants misappropriated all of the Bitcoin they accepted from pool participants,” CFTC said.

Though the agency slapped Steynberg with the fine, it cautioned that it “may not result in the recovery of any money lost because wrongdoers may not have sufficient funds or assets.”

Steynberg, a fugitive from South African law enforcement, has been detained in Brazil on an Interpol arrest warrant since the end of 2021, the CFTC said. The regulator has permanently barred him from trading in any CFTC-regulated markets.

South Africa’s FSCA said they will respond to Bloomberg’s queries later.

The scandal prompted South African authorities to regulate trading in cryptocurrencies and last year declared crypto assets as financial products, requiring companies involved to obtain a license from June 1.

--With assistance from Adelaide Changole.

(Updates with background in the third paragraph.)