A Texas court has ordered Mirror Trading International Proprietary Limited (MTI) to pay $1.7 billion in restitution and penalties. The record-breaking fine was in connection with accusing the South African crypto firm and its chief of running a large-scale fraud scheme involving Bitcoin.
Per the court papers, MTI CEO Johannes Steynberg will pay $1.7 billion in restitution to victims who were defrauded by the scheme, while another $1.7 billion will be imposed as a civil penalty. This is the highest civil monetary penalty ever ordered in any commodities or cryptocurrency case, according to the Commodity Futures Trading Commission (CFTC).
The CFTC has originally brough the charges against Steynberg and his business back in June 2022, alleging that they accepted 29,421 BTC for running an unlicensed commodity pool between May 2018 and March 2021. The scheme defrauded 23,000 investors in the US and elsewhere out of more than $1.7 billion at the time of acceptance.
To create the illusion of their Ponzi scheme, the defendants distributed false account statements to fund participants, telling investors that they made steady gains from trading the cryptocurrency, according to the complaint.
““The settlement with MTI and default judgment against Steynberg represent the latest stage in our battle against fraudsters who victimized over 23,000 individuals from the U.S.,” stated Director of Enforcement Ian McGinley. “Here, the fraudsters made the most modern of promises, claiming their ‘Advanced Intelligence Software with Bitcoin as the base currency’ would create untold wealth for investors, but were actually committing a classic form of fraud, a multilevel marketing scam. Whether a scam involves fictitious electronic trading ‘bots’ or Bitcoins, as this action involving a South African entity shows, we will pursue the scam artists wherever they may be.”
According to the CFTC, Steynberg experienced consistent losses and covered his fraud by making fabricated statements and creating false account statements. He also utilized promotional materials that showed trading returns based on hypothetical results, without including the required disclosure language.
The order also finds that the defendant accepted clients’ trades and funds and therefore acted as Eligible Contract Participants (ECPs), without registering as such with the CFTC.
In addition to the fiscal penalties, the order imposes lifetime trading, solicitation and registration bans against Steynberg.
Steynberg founded MTI in April 2019, which quickly became one of the fastest-growing cryptocurrency trading platforms in the world, with a reported user base of over 260,000 individuals. The platform’s success was falsely attributed to its unique trading algorithm, which used artificial intelligence and machine learning to analyze market trends and make profitable trades on behalf of its users.
However, in late 2020, MTI’s operations came under scrutiny, with allegations of fraud and misconduct being leveled against the company. In early 2021, MTI was placed under provisional liquidation by a South African court, and Steynberg was arrested on charges of fraud and racketeering.
Finally, the CFTC warned victims that although it works closely with authorities to seek prompt return of all misappropriated funds, wherever situated, they may not recover their lost money because the wrongdoers may not have sufficient funds or assets.
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