For a long time, the United States has been expected to make rules that will regulate the cryptocurrency market, putting an end to fraud and other vices stymieing sustainable growth in the industry. While the regulation lingers, authorities are stepping up crackdown on fraud and malpractices in the cryptocurrency industry.
During the week, the U.S commodities regulator, Commodity Futures Trading Commission (CFTC), filed civil charges against a South African company and its CEO for fraud and registration violations.
The company is accused of running a fraudulent commodity pool worth over $1.7 billion in bitcoin. According to the watchdog, Mirror Trading International Proprietary Limited (MTI), the South African bitcoin pool operator, and Cornelius Johannes Steynberg, its CEO, set up a fraud scheme, soliciting bitcoin online from thousands of people including 23,000 Americans.
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“MTI had operated a 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,” the CFTC said.
It said that instead of trading forex as MIT claimed, the company embezzled pool funds, misrepresented trading and performance, faked account statements and used a fake broker, where the trading happened. Just a fraction of the pooled 29,421 bitcoin was ever invested, the regulator said. Steynberg and the company also lied about using trading “bots”.
Steynberg has been on the run until he was recently nabbed by Interpol in Brazil, according to the CTFC, who added that the ponzi scheme is the largest involving bitcoin fraud that it has ever handled.
“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,” CTFC said in a statement.
“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.”
The CFTC is seeking full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and CFTC Regulations.
Meanwhile, Ruja Ignatova, also known as “Cryptoqueen,” a German citizen who’s also accused of defrauding investors out of $4 billion by selling a fake cryptocurrency called OneCoin has been added to the FBI’s list of its ten most-wanted fugitives, according to a statement by US officials on Thursday.
She has been on the run since 2017 when she learnt that her American boyfriend was cooperating with the FBI on its investigation on OneCoin. She was charged with eight counts including wire fraud and securities fraud for running the Bulgaria-based OneCoin Ltd as a pyramid scheme.
The FBI has placed $100,000 on Ignatova. She was charged alongside Mark Scott, a former corporate lawyer who prosecutors said laundered around $400 million for OneCoin, and has been found guilty of conspiracy to commit money laundering and conspiracy to commit bank fraud.
The crackdown on fraud in the crypto industry is expected to inspire investors’ faith, especially at a time when the industry is having one of its worst moments that some have attributed to malpractice.