Cryptocurrency Scam: South African Bitcoin Ponzi Scheme MTI Fined $3.46 Billion by US Court

The U.S. Commodity Futures Trading Commission (CFTC) announced that it has successfully prosecuted South African Bitcoin mining pool operator MTI and its founder and CEO Steynberg for fraud and operating without proper registration in July last year. The U.S. District Court imposed a total of $3.46 billion in restitution and civil penalties, marking the largest Bitcoin-related fraud case in CFTC history.

• Chainalysis identified MTI as the "largest cryptocurrency scam of 2020"
• Ponzi scheme fraud tactics
• Beware of high annualized return traps

Chainalysis Calls MTI the "World's Largest Cryptocurrency Scam of 2020"

Currently undergoing liquidation proceedings, Mirror Trading International Proprietary Limited (MTI) is a global Bitcoin mining pool company based in South Africa. The judgment found that its founder, Steynberg, engaged in fraud related to the retail foreign exchange market, improper registration, and failure to comply with Commodity Pool Operator (CPO) regulations.

In addition to facing exorbitant civil penalties, the court issued a default judgment where the defendant's absence will be considered an admission of guilt and a permanent injunction—Steynberg will be permanently barred from registering with the CFTC and engaging in trading activities in any CFTC-regulated markets.

The court also cautioned that wrongdoers may not have sufficient assets, so fines may not recover all the losses. This event is not only the largest fraud case related to Bitcoin in CFTC history but also the highest civil penalty amount ever imposed by the CFTC on all cases. It was also dubbed the "World's Largest Cryptocurrency Scam of 2020" in the 2021 Cryptocurrency Crime Report by the blockchain data analysis company, Chainalysis (source).

Ponzi Scheme Fraudulent Practices

According to the official press release from the CFTC, between 2018 and 2021, Steynberg, acting as the founder of MTI, repeatedly solicited Bitcoin from the public through websites and social media to participate in a Bitcoin mining pool created and operated by MTI and Steynberg himself. They falsely claimed to generate substantial profits through their unique artificial intelligence robots trading forex. The CFTC stated that MTI collected at least 29,421 Bitcoins from the U.S. and worldwide within three years, with a total value exceeding $1.7 billion as of March 2021.

In the Chainalysis report, users described MTI's promise at the time to engage in programmatic trading, where users only needed to deposit at least $100 worth of Bitcoin to enjoy a daily return rate of 0.5%, nearly a mythical 500% annual return. MTI was ultimately forced into final liquidation in June 2021.

(Further reading: Judge issues interim liquidation order in the MTI liquidation case, designating Bitcoin as intangible asset)

Beware of High Annualized Return Traps

Blockchain and cryptocurrency scams are rampant, with schemes promising high returns to investors but actually operating as Ponzi schemes that use later investors' funds to pay early investors, a recurring pattern in the industry. It is not the first time such scams have surfaced.

It is recommended that investors thoroughly scrutinize the whitepapers and operational models of investment targets, verify transparency in finances and fund flows, assess the reputation and track record of developers and promoters, utilize various channels like media and communities for in-depth understanding, and practice sound fund management to avoid asset losses.