CFTC brings $1.7B fraud case involving Bitcoin against South African national

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The United States Commodity Futures Trading Commission, or CFTC, has taken enforcement action against a South African national in what the regulator called the “largest bitcoin-related fraud scheme”.

In an announcement Thursday, the CFTC said it has filed a civil enforcement action in federal court for fraud and registration violations against Cornelius Johannes Steinberg. The South African national allegedly created and operated a global crypto-commodity pool totaling more than $1.7 billion, allowing only participants to pay with Bitcoin (BTC).

The CFTC alleged that Steynberg used South African-based Mirror Trading International Proprietary Limited to solicit BTC from the public using various social media and websites. From May 2018 to March 2021, the regulator claimed that it accepted at least 29,421 BTC — valued at more than $1.7 billion at the time, but approximately $564 million at press time — including from individuals in the United States.

“The defendants embezzled, directly or indirectly, all the bitcoins they accepted from the pool participants,” the CFTC said. “The CFTC seeks full refunds to fraudulent investors, revocation of ill-gotten gains, civil financial penalties, permanent registration and prohibition of trading, and a permanent injunction against future violations of the CFTC and CFTC regulations.”

Related: CFTC Action Against Gemini Is Bad News for Bitcoin ETFs

The case against Steynberg is the latest in a series of enforcement actions taken by the CFTC against individuals allegedly using cryptocurrencies for illicit purposes or digital asset firms in violation of the Commodity Exchange Act. In June, the CFTC filed a lawsuit against Gemini, claiming that the crypto exchange provided false or misleading statements to the regulator in 2017. A federal court also ordered crypto derivatives exchange BitMEX founders to pay $30 million in fines as part of the conclusion. . The suit filed by the Commodity Futures Trading Commission in October 2020.

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