Today, the Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Western District of Texas against Cornelius Johannes Steynberg of South Africa and Mirror Trading International Proprietary Limited (MTI), a South African company, alleging that they operated a fraudulent scheme to solicit, accept, and pool more than $1.7 billion to trade off-exchange, retail foreign currency (forex) on a leveraged, margined and/or financed basis.  Defendants engaged in an international fraudulent multilevel marketing scheme via various websites, in addition to social media, to solicit bitcoin from members of the public for participation in their pool.  At least 23,000 of the pool participants—most, if not all, of whom were not eligible contract participants—were from the United States.

Instead of trading forex as represented, Defendants misappropriated pool funds, misrepresented their trading and performance, provided fictitious account statements as well as created a fictitious broker at which trading purportedly took place, and in general operated the pool as a Ponzi scheme.  As a matter of fact, the little trading that Defendants did was unprofitable, and they misappropriated essentially all of the at least 29,421 bitcoin accepted from participants.  The CFTC’s complaint seeks full restitution on behalf of defrauded participants, as well as disgorgement, civil monetary penalties, permanent trading and registration bans, and other relief.  Notably, this fraud represents the largest to date charged by the CFTC involving Bitcoin.

Fraudsters often take full advantage of new technology, global connectivity, and perceived lack of a cop on the beat to perpetrate their scams.  This action demonstrates that the Division of the Enforcement (DOE) is committed to protecting Americans, regardless of the technology or borders involved, and that the CFTC is very much focused on detecting and prosecuting these frauds, including by working closely with our counterparts overseas.  I want to commend DOE staff for their outstanding collaboration with domestic and foreign counterparts in investigating this matter, including the South African Financial Sector Conduct Authority, the Financial Services Commission of Belize, the Finnish Financial Supervisory Authority, the Texas State Securities Board, the Alabama Securities Commission, the North Carolina Secretary of State, Securities Division, the Mississippi Secretary of State, Securities Division, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Bureau of Investigation’s Southern District of New York Field Office.