The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action in the US District Court for the Western District of Texas charging Cornelius Johannes Steynberg and Mirror Trading International Proprietary Limited (MTI) (collectively, the defendants) with fraud and registration violations.[1] The action alleges that from May 2018 through March of 2021, the defendants orchestrated a multilevel marketing scheme to solicit bitcoin transfers from individuals into a centralized asset pool (the pool) under the guise of offering investment opportunities.[2] The defendants made these offerings without any CFTC registrations of any kind.[3] The CFTC alleges that MTI should have been registered as a commodity pool operator (CPO) while Steynberg should have been registered as an associated person (AP) of MTI.[4] This case is significant not only because of the magnitude of the alleged fraud, but also for the CFTC’s assertion of enforcement authority over the cryptocurrency industry at large.
MTI was publicly marketed as an opportunity for individuals to invest bitcoin into the defendants’ pool and earn profits from off-exchange leveraged trades.[5] The CFTC has alleged that the defendants’ scheme purportedly amassed ill-gotten gains of at least 29,421 Bitcoin at an estimated value of over $1.7 billion.[6] The CFTC further alleges that the defendants misappropriated all of the pool funds, which makes this enforcement “the largest to date charged by the…
