Fugitive CEO Hit with $3.4 Billion Fine in Record Fraud Case

Fugitive CEO Hit with $3.4 Billion Fine in Record Fraud Case

While the cryptocurrency market continues to evolve, the amount of stolen cryptocurrency has increased in recent years, creating a large pool of fraud cases. In a historic verdict, US District Judge Lee Yeakel ordered a South African executive paying more than $3.4 billion in restitution and fines for a Bitcoin fraud scheme.

Cornelius Johannes Steynberg, founder and CEO of Mirror Trading International Proprietary, was involved in a “fraudulent multi-level marketing scheme” to solicit Bitcoin from people for participation in an unregistered commodity pool operated by Mirror Trading.

The scheme resulted in the solicitation 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 around the world.

However, Steynberg misappropriated all Bitcoin accepted from pool participants, 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 any lost money because violators may not have sufficient funds or assets.”

Since the end of 2021, Steynberg has been detained in Brazil on an Interpol arrest warrant, for being a fugitive from the South African police. The CFTC has imposed a permanent ban on Steynberg’s trading activities in all markets that fall under its regulation.

Modus Operandi of the Scheme

Steinberg’s Mirror Trading International Proprietary operated as a Bitcoin investment pool utilizing bot trading algorithms. 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 a scam and were never used to trade cryptocurrencies. Instead, the pool’s funds were used to enrich the pockets of Steynberg and other scheme operators.

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The US agency further alleged that Steynberg misrepresented the pool’s performance and concealed the significant losses incurred. The funds that 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 Bitcoin deposits to acquire assets such as real estate, luxury cars and expensive watches.

Implications of the verdict

The $3.4 billion fine imposed on Steynberg is the largest civil monetary penalty in any CFTC case. The magnitude of the fine highlights the severity of the fraud and the significant role Bitcoin played in the scheme.

The verdict could also serve as a warning to other malevolent actors in the cryptocurrency space, signaling that they cannot escape legal consequences. However, the CFTC’s warning that the fine may not result in the recovery of any lost funds highlights the need for greater 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 prevent scams.

Meanwhile, Steynberg’s conviction and hefty fine imposed on him may help build trust in the cryptocurrency space to some extent, as it demonstrates that fraud and other illegal activities in the sector are not immune from legal consequences.

Bitcoin (BTC) price chart on TradingView
Bitcoin (BTC) price moving sideways on the 4-hour chart. Source: BTC/USDT at TradingView.com

Regardless of the news circulating in the sector, including that of large banks First Republic Bank (FRC) collapsethe crypto market experienced an upward movement.

In the last 24 hours, the global cryptocurrency market cap increased by 1.4%, with the total value over $1.2 trillion.

iStock Featured Image, TradingView chart

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