Bitcoin Pyramid Scheme Scammer Ordered to Pay $3.4 Billion
The Commodities Futures Trading Commission patted itself on the back for winning one of the biggest civil cases against a crypto crook, even though most – or some – of those affected will see some of their money returned. On Thursday, a Texas judge issued one default judgment in a billion dollar fraud case against a man accused of swindling billions in bitcoin from unsuspecting people online looking to invest in bitcoin.
The CFTC filed its massive $3.4 billion civil suit last year against Cornelius Johannes Steynberg, AKA Joe Steyn, listed as a South African man who, at the time the suit was filed, was operating in Brazil with his company Mirror Trading International. The agency claimed that Steynberg ran an online currency pool for three years from 2018 to 2021. Users had to pay bitcoin to access the pools found on websites such as “MTImembers” and “myMTIclub”. The CFTC said he got people to invest 29,421 bitcoins, which totaled $1.7 billion at the time.
In his original complaint, the agency said MTI lied to pool participants that they were trading foreign exchange off-exchange, otherwise known as “forex.” Steynberg reportedly told the pool participants that his company used a bot to make successful trades using their money, although this was all a lie and all bank statements offered to participants were just fakes made from demo accounts on an external trading platform. Steynberg’s brokerage platform, which he called Trade300, didn’t even exist, and he used word of mouth and other heavy-handed advertising campaigns to get more people involved, hence the accusation that it’s a multi-level marketing scheme.
“Defendants never traded profitably, never made a profit, and misused substantially all of the at least 29,421 bitcoins they accepted from participants,” the agency alleged in the lawsuit.
The court order now has Steynberg and the company each paying $1.73 billion in civil penalties. While the staggering $3.4 billion penalty is easily one of the largest penalties ordered against any crypto fraudster, it remains unclear whether anyone caught by Steynberg’s scheme will ever see their money again. The CFTC said the company was currently in liquidation proceedings in South Africa after declaring bankruptcy in 2021.
The agency admitted that victims may not see any restitution “because violators may not have sufficient funds or assets.” Attorney information for Steynberg was not available as he never responded to multiple subpoenas issued by the CFTC, hence the default judgment. According to the agency’s release, the man behind the scheme has been arrested by Interpol agents in Brazil and is also a fugitive from South African law enforcement. Steynberg is also wanted by IRS financial police for his involvement in the MTI scheme.
Gizmodo reached out to the CFTC to find out if the agency is contacting Steynberg to collect his penalties, but we did not immediately hear back.
Although Steynberg’s scam was carried out until 2021 (itself a massive year for cryptogrifts), crypto scams were rampant last yearand they continue to chase investors into 2023. US financial agencies have tried to warn banks from crypto fraud amid reports from researchers who almost a quarter of the new crypto tokens are actually built by scammers who plan to pump up the price of tokens and dump them later for a tidy profit.
At this point in the life of crypto – more than 14 years from bitcoin’s earliest beginnings – it’s hard to tell whether willful fraudsters are attracted to the anonymous benefits of crypto, or crypto inevitably makes every project a scam. Research from The Bank for International Settlements has shown that most people who invest in bitcoin actually lose moneyso at this point, does the chicken or egg argument really matter?
