The Commodity Futures
Trading Commission (CFTC), the US derivatives market industry watchdog, is
handling its largest fraud scheme case involving Bitcoin (BTC).
The US regulator
announced on Thursday that it has filed a civil
enforcement action
against South African man, Cornelius Johannes Steynberg, and an unregistered
commodity pool operator, Mirror Trading International Proprietary Limited (MTI).
Both parties were
charged with fraud and registration violations before the U.S. District Court
for the Western District of Texas.
This action comes a few days after CFTC slammed a $1.37m fine on Starberry Limited for acting as a futures commission merchant without a permit.
According to the market supervisor, Steynberg, who is a fugitive from South Africa, created and
ran a global foreign commodity pool through MTI.
MTI, which was operated on
South Africa’s laws, only permitted investors to participate in its pool by
paying with BTC, the US derivates market regulator explained.
The commodity pool operator was
subsequently able to generate over $1.7 billion from 23,000 investors from the US and more from around the world.
These investors were non-eligible contract participants (ECPs), CFTC pointed out.
Steynberg alongside
Mirror Trading subsequently misappropriated, either directly or indirectly, all
of the Bitcoin fund (at least 29, 421 BTC), CFTC further disclosed.
“This action is the
largest fraudulent scheme involving Bitcoin charged in any CFTC case,” the US
financial industry watchdog said.
More Details on the Case
According to CFTC,
between May 2018 and March 2021, Steynberg engaged in “an international
fraudulent multi-level marketing scheme.”
Steynberg allegedly used
websites and social media to solicit Bitcoin from the public for
participation in a pool ran by MTI .
“The commodity pool was
controlled by MTI and Steynberg and purportedly traded off-exchange retail
foreign currency on a leveraged, margined and/or financed basis with
participants who were not eligible contract participants (ECPs) through what
the defendants falsely claimed was a proprietary “bot” or software program,”
CFTC further explained.
CFTC urged the District
Court to grant full restitution to the scammed investors and order MTI to give up the ill-gotten gains.
The market supervisor
also asked for civil monetary penalties, permanent registration and trading
bans, and a permanent injunctions against future violations of the Commodity
Exchange Act and CFTC Regulations.
“The CFTC cautions
victims that restitution orders may not result in the recovery of money lost,
because the wrongdoers may not have sufficient funds or assets,” the US
regulator warned.
CFTC pointed out that South
Africa, Belize and Finland’s financial industry regulators as well as the US
Federal Bureau of Investigation’s Southern District of New York Field Office,
among others, assisted in the case.
This article was written by Solomon Oladipupo at www.financemagnates.com.Regulation, Retail FXRead More