MTI CEO ordered to pay $1.7 billion in restitution for bitcoin Ponzi scheme

A United States court has ordered Johann Steynberg, the CEO of defunct South African bitcoin Ponzi scheme Mirror Trading International (MTI), to pay over $1.7 billion in restitution to victims who lost money. The order, issued on September 7, 2023, follows a judgment made in April 2023.

The details 

• The U.S. Commodity Futures Trading Commission (CFTC) filed a case against Steynberg in June 2022 for collecting nearly 30,000 bitcoins from people under the guise of bitcoin and forex trading.
• Earlier in April, the same court had ruled that Steynberg should pay $1.7 billion as restitution in addition to a civil fine of the same amount. 
• While MTI primarily operated out of South Africa, many of it’s victims lived in the U.S. According to Chainalysis, the U.S. was MTI’s second largest market, only behind South Africa. 
• The company obtained these monies from unsuspecting users in a network marketing scheme while promising to pay them as much as 500% ROI, the CFTC said. 
• The CFTC alleged that Steynberg and MTI misappropriated these funds and presented fake trading and account statements when queried by South African and U.S. authorities. 
• In its suit filed last year, the CFTC had asked the court to order the full restitution of MTI’s customer funds, imposing a civil monetary penalty and a permanent trading ban on the company. The ruling signifies an end to the CFTC’s lawsuit against the company. 
• It is unclear if the ruling includes a timeframe within which Steynberg is mandated to pay the fines in full or how he plans to do so, especially since he is still incarcerated in Brazil. 

Key context 

• Mirror Trading International, founded in 2018, paraded itself as a bitcoin trading and investment company only to be ranked as the biggest scam of 2020 by the blockchain analytics firm Chainalytics. 
• South Africa’s Financial Services Conduct Authority (FSCA) advised users to withdraw their money from MTI after its investigations showed irregularities in the company’s mode of operations and the documents it presented. 
• Not long after this, the FSCA opened criminal proceedings against the company for illegal and misleading operations. 
• CEO Johann Steynberg took to his heels in December 2020 and was arrested a year later in Brazil on charges of identity fraud, to which he was subsequently convicted and ordered to pay a $27,000 fine last month. 

Zoom out 

• In the wake of crypto scams in Africa making away with millions of dollars, experts have said better regulations can help forestall these occurrences in the future. 
• Mariblock’s lead editor, Oluwaseun Adeyanju, proposed the formation of a collaborative self-regulatory organization authorized to safeguard investors, promote ethics, and combat fraud.  

“Self-regulation in the financial sector has a rich history of safeguarding consumers. Through industry-led initiatives and standards, it promotes transparency, fair practices, and accountability, ensuring that financial institutions prioritize the welfare of their clients.” 

• While commenting on the BTCM scam that recently went bust in Kenya, the president of the Blockchain Association of Kenya, Micheal Kimani, noted that scams are prevalent because of the lack of proper regulations and rules. 

“Generally, I think what is missing is a consumer protection framework, which is difficult to establish because of the policy gaps. I think both go hand in hand.”