CTFC wins record $3.4B penalty payment in Bitcoin-related fraud case

Bitcoin

The CFTC said it's the largest fraudulent Bitcoin scheme charged in any of its cases and the "highest civil monetary penalty ordered in a CFTC case."

A record-breaking $3.4 billion penalty has been handed down by a Judge in a lawsuit brought by a United States financial regulator involving a fraudulent scheme involving Bitcoin (BTC).

An April 27 statement from the Commodity Futures Trading Commission (CFTC) said Texas District Court Judge Lee Yeakel ordered Cornelius Johannes Steynberg to pay the sum for his role in perpetrating a fraudulent commodity pool scheme involving foreign currency transactions and Bitcoin.

Steynberg, a South African national and CEO of Mirror Trading International Proprietary Limited (MTI), a purported trading and networking company, was ordered to pay $1.73 billion in restitution to defrauded victims and an additional $1.73 billion civil monetary penalty.

The CFTC said it is the "highest civil monetary penalty ordered in any CFTC case" and also "the largest fraudulent scheme involving Bitcoin charged in any CFTC case."

Today, a federal court ordered a South African CEO to pay more than $3.4 billion for forex fraud, making this the CFTC’s largest fraud scheme case involving bitcoin. Learn more: https://t.co/X2vmHIRLkh
— CFTC (@CFTC) April 27, 2023

The order explained that as the head of MTI, Steynberg “engaged in an international fraudulent multilevel marketing scheme to solicit Bitcoin from members of the public for participation in an unregistered commodity pool,” the value of which totaled more than $1.7 billion as of March 2021.

From May 2018 to March 2021, the CFTC claimed he accepted at least 29,421 BTC valued at more than $1.7 billion at the time — but currently worth approximately $867 million — from 23,000 individuals in the U.S. and even more globally.

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

According to the April 27 order, Steynberg was found liable for fraud in connection with retail foreign currency transactions, fraud by an associated person of a commodity pool operator (CPO), registration violations and failure to comply with CPO regulations.

Additionally, Steynberg is permanently prohibited from engaging in conduct that violates the Commodity Exchange Act (CEA). He is also permanently banned from registering with the CFTC or trading in any CFTC-regulated markets.

On June 30, 2022, the CFTC announced that it had filed a civil enforcement action in federal court for fraud and registration violations against Steynberg.

Initially, Steynberg fled from South African law enforcement and is currently a fugitive but has been detained in Brazil on an INTERPOL arrest warrant since December 2021.

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Terrible crypto trader gets 42 months for fraud, claiming he was a total gun

CFTC

Jeremy Spence aka “Coin Signals” scammed around $5 million from 170 investors who were unaware their crypto was used to fund a Ponzi scheme.

A crypto trader who defrauded over 170 people was sentenced to 42 months in prison on May 11 for operating a series of cryptocurrency funds claiming to make big returns but in reality were losing money and instead operated as a Ponzi scheme.

The DOJ said that 25 year old Jeremy Spence had solicited millions through false representations, “including that Spence’s crypto trading had been extremely profitable when, in fact, Spence’s trading had been consistently unprofitable.”

Spence, who operated the social media channels for a crypto investment scheme called “Coin Signals” was handed the decision by United Stated District Judge Lewis Kaplan for the U.S. District Court for the Southern District of New York. Spence was also sentenced to three years of supervised release and ordered to pay back his victims an amount of over $2.8 million.

Spence was arrested in January 2021 by the Federal Bureau of Investigation (FBI) and seperate civil charges were brought forward by the Commodity Futures Trading Commission (CFTC).

Spence pleaded guilty to commodities fraud in November 2021 for soliciting over $5 million from unwitting crypto investors by creating various cryptocurrency funds from November 2017 until April 2019 which he falsely claimed were making returns but in reality were making losses.

One example provided by the DOJ said Spence posted a message to an online chat group claiming one of the funds made a 148% return that month.

According to Law360 U.S. District Judge Lewis Kaplan who presided over the case said:

"The thing I was struck by was the stupidity of the people you gulled into investing with you, there are real-life consequences to these shenanigans and they are serious."

Seeking to make a profit investors would transfer crypto to Spence to invest but as his trades weren’t making gains he created fake account balances to hide the losses. Spence started operating a Ponzi scheme using funds from new investors to pay earlier investors, with estimates that around $2 million worth of cryptocurrencies were distributed in this manner.

In a statement to the court Spence told Judge Kaplan that he is “mortified” by his own behavior, apologizing to his investors and claimed was unqualified to trade the amount he was sent adding he “entered a world that [he] was completely unprepared for”.

Cointelegraph requested comment from Spence's legal representatives but did not receive a response within the time given.

commodity fraud