US CFTC orders payment of more than 400 billion yen in bitcoin investment fraud

Largest civil penalty in CFTC history

The U.S. Commodity Futures Trading Commission (CFTC) said on the 27th that the court ordered the defendants to pay about 460 billion yen ($3.4 billion) in large-scale fraud related to the crypto asset (virtual currency) Bitcoin (BTC). Announced.

A district court for the Western District of Texas sought approximately ¥230 billion (approximately $1.7 billion) in refunds to defrauded victims and ¥230 billion (approximately $1.7 billion) in civil penalties. . This is the highest civil penalty amount of any case handled by the CFTC.

In addition, Cornelius Johannes Steinberg was permanently barred from registering a business with the CFTC or trading in a CFTC-regulated market.

Fraud case summary

The CFTC filed a complaint in June 2022 against Cornelius Johannes Steinberg, founder and CEO of Mirror Trading International Proprietary Limited (MTI), which is currently in liquidation in South Africa.

According to the complaint, from around May 2018 to around March 2021, Defendant Steinberg committed fraud to collect bitcoins from consumers under the guise of operating them.

Soliciting users by claiming that they could earn 0.5% to 1.5% per day by AI-powered trading bots just by depositing a small amount of bitcoin in their wallets. It is said that at least 29,421 BTC (equivalent to more than 200 billion yen as of the end of March 2021) was received from consumers around the world.

At least 23,000 US consumers also contributed to the pool. Defendant actually misappropriated all bitcoins received from pool participants.

In addition, although the order is to “return the funds to the victims,” ​​the CFTC cautions that the funds may not be fully recovered.

international investigation

Steinberg fled South Africa, but has been detained in Brazil since December 2021 following an Interpol arrest warrant.

Since MTI was based in South Africa, the CFTC was also working with the South African Financial Sector Conduct Authority (FSCA) in its investigation.

After the Texas Securities Commission pointed out that MTI was a “multilevel marketing fraud” in 2020, FSCA conducted its own investigation and found that MTI was a fraud that did not have the reserve assets necessary for its business.

In response to this, the defendant’s property has already been provisionally seized in South Africa, and MTI’s liquidation proceedings have begun.

South Africa has clarified the legal status of virtual currencies as one of the triggers for this fraud case. Regulation has started as a financial product.

connection: South African authorities start regulating virtual currency as a financial product

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