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In a recent lawsuit, the CFTC has revealed what it considers the single largest Bitcoin fraud case, involving South Africa’s MTI.
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Bitcoin (BTC) pool operator Mirror Trading International (MTI) over an alleged $1.7 billion fraud. The CFTC alleges that Cornelius Johannes Steynberg, CEO of the South Africa-based Bitcoin company, misappropriated customers’ funds. Describing the case as the “largest ever fraud scheme case involving Bitcoin,” the US regulator states that Steynberg accepted 29,421 BTC from 23,000 Americans.
The CFTC further specifies that the MTI CEO accepted BTC from investors worldwide for use in a multilevel marketing scheme. As a result, the CFTC is asking that the company refund investors. According to an official CFTC publication:
“The CFTC is seeking full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and CFTC Regulations.”
However, the American regulator also cautioned hopeful victims that restitution orders may not yield recovery of lost funds. This is because the defendants may not have sufficient funds or assets to cover said losses.
How the MTI Bitcoin Fraud Materialized, According to CFTC
According to the CFTC’s document, victims of the fraud believed that they were investing in a high-tech investment club. The allegations further state that MTI’s Steynberg promised 10% monthly returns on passive income using the platform’s algorithms. In addition, the CFTC’s charging documents also state that MTI promised bonuses to investors who referred friends and family.
The US agency also says that MTI’s scheme ran for approximately three years. The scheme stretched from May 18, 2018, through March 30, 2021. In that time, the scheme amassed a total of 29,421 BTC, more than $1.7 billion. In a press release, the CFTC stated:
“The little trading that Defendants did was unprofitable, and they misappropriated essentially all of the at least 29,421 Bitcoin accepted from participants.”
The prominent US commodities watchdog also added:
“Fraudsters often take full advantage of new technology, global connectivity, and perceived lack of a cop on the beat to perpetrate their scams.”
The CFTC revealed that Steynberg did not make proper disclosures and lied about the existence of an autonomous trading mechanism. Additionally, the MTI CEO never made a profitable forex swap and hoodwinked clients using bogus account statements. However, in early 2021, MTI began bankruptcy proceedings and liquidation in South Africa. This came from mounting regulatory pressure that the Bitcoin pool operator faced in both the US and South Africa.
Interestingly, the South African Financial Services Conduct Authority (FSCA) advised MTI investors to sever ties with the company back in August 2020. Describing MTI’s touted 10% monthly returns as questionable, the FSCA also said the company has no license.
Although a South African citizen, Steynberg was recently detained in Brazil on an Interpol arrest warrant, according to the CFTC.