Federal court ordered fugitive CEO to pay $3.4 billion in the largest-ever Bitcoin fraud case

A US federal judge has ordered the executive of a South African forex firm to pay more than $3.4 billion in fines and restitution for a bitcoin fraud scheme that the U.S. commodities regulator said was its largest-ever fraud case involving bitcoin.

Yesterday, the US Commodity Futures Trading Commission (CFTC) accused Cornelius Johannes Steynberg, the founder and CEO of Mirror Trading International Proprietary, of engaging in fraud related to retail foreign currency transactions, along with other violations.

According to a statement from the regulator on Thursday, Steynberg, whose last known residence was in South Africa, was ordered to pay a record-breaking $1.7 billion in restitution to victims of the fraudulent scheme and an additional $1.7 billion as a civil penalty. This ruling was made by Judge Lee Yeakel in the Western District of Texas, according to a court filing.

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

The CFTC’s complaint alleged that Mirror Trading International made false claims about having proprietary software, or a “bot”, that would generate substantial trading profits for investors who pooled their bitcoin with the company. However, in reality, no such software existed.

Cornelius Johannes Steynberg

In July, the CFTC accused Steynberg of running a fraudulent scheme through Mirror Trading International, which solicited bitcoin online from thousands of individuals, claiming to operate a commodity pool. Despite trading off-exchange, the firm allegedly engaged in retail foreign currency trading with ineligible participants.

Between May 2018 and March 2021, Steynberg is said to have accepted and misappropriated at least 29,421 bitcoin from roughly 23,000 participants, including more than 1,300 in Texas alone. By the end of the period, bitcoin was valued at over $1.7 billion. About 23,000 Americans were reported to have invested in the pool, CFTC said in a statement.

According to the CFTC, only a small fraction of the pooled bitcoin was actually invested and resulted in losses, while the majority of the funds were “misappropriated”. In 2021, the company filed for bankruptcy, and shortly afterward, South African authorities launched a fraud investigation.