Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 1 of 39

FILED
APR 242023
UNITED STATES DISTRICT COURT CLERK. U.S. D1CTR1(
WESTERN DISTRICT OF TEXAS WESTERN DIST J'.ZX(S
BY
V UTY

COMMODITY FUTURES TRADING Case No. 1:22-cv-635-LY

COMMISSION,

Plaintiff,
V.

MIRROR TRADING INTERNATIONAL

PROPRIETARY LIMITED, and
CORNELIUS JOHANNES STEYNBERG

Defendants.

ORDER FOR FINAL JUDGMENT BY DEFAULT, PERMANENT

INJUNCTION, RESTITUTION, CIVIL MONETARY PENALTY, AND OTHER
EOUITABLE RELIEF AGAINST DEFENDANT CORNELIUS STEYNBERG

Before the Court is Plaintiff Commodity Futures Trading Commission's ("Plaintiff' or

"CFTC") Motion for Entry of Default Judgment, Permanent Injunction, Restitution, Civil

Monetary Penalty, and other Equitable Relief against Defendant Cornelius Johannes Steynberg

("Defendant" or "Steynberg"), pursuant to Fed. R. Civ. P. 55(b)(2). For the reasons stated below

and good cause having been shown, the Motion is GRANTED.

I. BACKGROUND

On June 30, 2022, Plaintiff filed a Complaint charging Defendants Steynberg and

Mirror Trading International Proprietary Limited ("MTI") with violating anti-fraud and

registration provisions of the Commodity Exchange Act (the "Act"), 7 U.S.C.

§ 2(c)(2)(C)(iii)(I)(cc), 6b(a)(2)(A)-(C), 6k(2), 6m(l), 6o(l)(A)-(B), and 17 C.F.R.

§ 4.20(a)(l), (b), (c), 5.2(b)(1)-(3), 5.3 (a)(2)(i), (ii) (2022).

2. On October 11, 2022, the CFTC served Steynberg with the Complaint and

Summons by publication as authorized by the Court. Proof of Service, ECF No. 12.

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3. Steynberg' s period to answer or move against the Complaint expired on

November 15, 2022.1

4. Steynberg failed to respond to the Complaint within the time allowed, prompting

the CFTC to submit a Motion for Entry of Default Against Steynberg pursuant to Fed. R. Civ. P.

55(a). Mot. for Clerk's Entry of Default Against Defendant Steynberg, ECF No. 14.

On November 18, 2022, the Clerk entered default against Steynberg. Clerk's

Entry of Default Against Steynberg, ECF No. 15.

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. Findings of Fact

The Parties

6. Plaintiff Commodity Futures Trading Commission is an independent federal

regulatory agency charged by Congress with the administration and enforcement of the Act and

the Regulations promulgated thereunder.

Defendant Cornelius Johannes Steynberg is a citizen of the Republic of South

Africa. Steynberg's last known residence is in Stellenbosch, Western Cape South Africa. Upon

information and belief, he is a fugitive from South African law enforcement but was detained in

the Federative Republic of Brazil on an INTERPOL arrest warrant in or about late-December

2021. Throughout the Relevant Period, Steynberg held himself out as the Shareholder, Director,

and CEO of MTI. Steynberg has never been registered with the CFTC in any capacity.

Defendant Mirror Trading International Proprietary Limited is a company

organized and operated pursuant to the laws of the Republic of South Africa, with a principal

'Although Fed. R. Civ. P. 1 2(a)( 1 )(A)(i) requires a defendant to answer or move against a
complaint within 21 days of service, the Court permitted additional time for Defendant
Steynberg to answer following service by publication.
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place of business in Stellenbosch, Western Cape South Africa. MTI has never been registered

with the CFTC in any capacity.

Factual Overview

9. From at least May 18, 2018 through at least March 30, 2021 (the "Relevant

Period"), Steynberg, individually and as the controlling person of MTI, engaged in an

international fraudulent multilevel marketing ("MLM") scheme, using the websites

www.mtirnernbers.com, www. mirrortradinginternational. au.za, and www. myrnticlub. corn, in

addition to social media, to solicit Bitcoin from members of the public for participation in a

commodity pooi operated by MTI ("commodity pooi" or "Pool"). Compi. ¶ 1; Dee!. of Futures

Trading Investigator George H. Malas ("Malas Decl. III") ¶J 8, 15. The Pool purportedly traded

off-exchange, retail foreign currency ("forex") on a leveraged, margined and/or financed basis

with participants who were not eligible contract participants ("ECPs") through a proprietary

"bot" or software program. Compl. ¶ 1; Malas Dee!. III ¶ 8. During the Relevant Period,

Steynberg, individually and as the principal and agent of MTI, accepted at least 29,421 Bitcoin

with a value of not less than $1,733,838,372 at the end of the Relevant Period from at least

23,000 U.S. participants (over 1,300 from Texas), and even more throughout the world, without

being registered as an associated person ("AP") of a commodity pool as required by federal law.

Compl. ¶IJ 1, 7, 16, 22; Malas Dee!. III ¶J 7b, 8; Malas Decl. III Ex. 1 at MTI-NFA-7-1 to 7-2, 8-

1 to 8-2 (NFA Certs.). At the same time, MTI operated as a commodity pool operator ("CPO")

without being registered as such as required by federal law. Compl. ¶IJ 1, 7, 17; Malas Dee!. III

¶ 7a; Malas Deel. III Ex. 1 at NFA-5-1 to 5-2, 6-1 to 6-2 (NFA Certs.). Defendants

misappropriated, either directly or indirectly, all of the Bitcoin they accepted from pool

participants. Compl. ¶J 1, 4, 6, 39-43; Malas Decl. III ¶J 8, 23, 25.

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10. In early 2021, MTI was the subject of bankruptcy proceedings in the Republic of

South Africa. Compi. ¶ 5; Malas Dccl. III ¶ 11. By April 2021, the South African Financial

Services Conduct Authority ("FSCA") was working with South African bankruptcy liquidators

as MTI had been placed into liquidation.2 Compl. ¶ 5; Malas Dccl. III ¶ 11. Shortly thereafter, it

was learned that FXChoice, Ltd. ("FXChoice"), a broker located in Belize, had frozen

Defendants' Pool account (account No.**4850, referred to hereinafter as "FXChoice Pool

account" or "Pool account"), eight months earlier, on or about August 7, 2020, for suspected

fraud. Compl. ¶J 5, 32-3 8; Malas Decl. III ¶J 11, 39; Malas Dccl. III Ex. 3 at MTI-FSCA-36-2,

50-1, 56-3, 7 1-4, 89-2 1 (FSCA Docs.). At the time FXChoice froze the Pool account in August

2020, it held only 1,280 Bitcoin, with a value of approximately $75.4 million at the end of the

Relevant Period. Compl. ¶ 5; Malas Decl. III ¶J 11, 39, 41d; Malas Dee!. III Ex. 3 at MTI-

FSCA-36-1, 49-3, 50-1, 89-18 (FSCA Docs.). Of the 29,421 Bitcoin participants sent to

Defendants' electronic wallets ("E-Wallets") for the MTI pool, Defendants deposited only 1,847

into the Pool account. Comp!. ¶J 4, 6, 40; Malas Dcc!. III ¶J 12, 24, 41c; Malas Dccl. III Ex. 3 at

MTI-FSCA-36-1, 46-3, 49-3, 89-18 (FSCA Docs.). Therefore, Defendants failed to deposit

27,574 Bitcoin from participants into the FXChoice Pool account. Compl. ¶11 6, 40; Malas Dee!.

III ¶J 12, 14, 24. Defendants' limited trading in the FXChoice Pool account resulted in overall

losses, and Defendants misappropriated the remaining 27,574 Bitcoin sent by participants for

trading, including by failing to use all of the funds for trading and by providing Bitcoin to certain

participants as sham "profits" and "bonus" payments in the nature of a "Ponzi" scheme. Compl.

¶J 6, 39-43; Malas Decl. III ¶IJ 14, 23; Malas Dccl. III Ex. 3 at MTI-FSCA-13-3, 36-2, 71-4, 89-

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MTI's joint liquidators filed for bankruptcy in the U.S. District Court for the Southern District
of Florida under Chapter 15 of the U.S. Bankruptcy Code. See In re Mirror Trading Int'l (PTY)
Ltd., No. 23-1 1046-PDR (S.D. Fla. filed Feb. 9, 2023).

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3 to 89-4, 89-18, 89-35 (FSCA Docs.). Upon information and belief, Steynberg fled South

Africa and was subsequently arrested in the Federative Republic of Brazil for using a false

identity and then held on an INTERPOL warrant, where he is currently being detained and

awaiting extradition proceedings. Compi. ¶ 16; Malas Decl. III ¶ 7b.

The Fraudulent Scheme

1. The Initial Scheme

11. Steynberg founded MTI in the Republic of South Africa in April 2019. Compl.

¶ 21; Malas Decl. III ¶ 7b. Throughout the Relevant Period, Defendants, by and through

Steynberg, accepted at least 29,421 Bitcoin with a value of not less than $1,733,838,372 at the

end of the Relevant Period from at least 23,000 U.S. participants and others throughout the world

to participate in the unregistered commodity pool. Compl. ¶ 21; Malas Decl. III ¶J 8, 10, 12.

Most if not all of these participants were non-ECPs based upon information and belief. Compl.

¶ 21; Malas Decl. III ¶ 16. Defendants, through Steynberg, knowingly and falsely represented to

actual and prospective pooi participants that Defendants operated a pooled forex account, using

an experienced trader to produce consistent, high rates of return. Compl. ¶ 21; Malas Decl. III

¶J 13, 29, 32; Malas Deci. III Ex. 3 at MTI-FSCA-89-3, 89-15 (FSCA Docs.), Ex. 5 at MTI-

CFTC-WEB-5-1 (MTI Website).

12. Throughout the Relevant Period, Defendants solicited actual and prospective

participants through social media such as Facebook, Instagram, and YouTube. Compl. ¶ 22;

Malas Decl. III ¶ 15; Malas Decl. III Exs. 5, 7 (MTI Website; MTI Social Media). Defendants

also solicited through in-person meetings, word-of-mouth, instant messaging services such as

Telegram Messaging App, podcasts, and websites operated by Steynberg, including

www. mirro rtradingintern ational.au.za, www. rntirnernbe rs. corn, www. myrnticlub. corn, and

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www.mymticlub.com (collectively, the "websites"). Compl. ¶ 22; Malas Dccl. III ¶J 15-2 1;

Malas Decl. III Exs. 5, 7 (MTI Website; MTI Social Media). Defendants accepted Bitcoin from

at least 23,000 U.S. participants, including 1,341 known participants located in the State of

Texas. Compi. ¶ 22; Malas Decl. III ¶J 8-9. Defendants also relied heavily upon MLM

marketers to tout MTI and paid both participation and referral bonuses to MLM touters from

non-existent "profits." Compi. ¶ 22; Malas Deci. III ¶J 9, 14, 15; Malas Deci. III Ex. 2 at MTI-

TSSB-68-3 (TSSB Does.), Ex. 5 at MTI-CFTC-WEB-3-10 (MTI Website).

2. Defendants' Solicitations to Participants

13. Steynberg, individually and as the agent of MTI, made claims in social media and

on MTI's websites to actual and prospective participants that "the objective of Mirror Trading

International is to grow your Bitcoin." Compl. ¶ 23; Malas Dccl. III ¶IJ 16, 21a; Malas Deci. III

Ex. 5 at MTI-CFTC-WEB-3-6 (MTI Website). Steynberg, individually and as the agent of MTI,

represented that MTI used "Bitcoin as its base currency" and "advanced digital software and

artificial intelligence (Al) to trade on the international Forex markets," and that MTI's "[d]aily

profits are divided in a sustainable manner and are added to member accounts." Compl. ¶ 23;

Malas Decl. III ¶J 16, 21b; Malas Decl. III Ex. 5 at MTI-CFTC-WEB-5-1 (MTI Website).

14. Defendants targeted their solicitations to non-ECPs with limited trading

experience, claiming participants could earn "passive income" by funding their investment with

"as little as $100,' and "no trading experience required." Compl. ¶ 24; Malas Dccl. III ¶J 16,

21b-21c; Malas Dccl. III Ex. 5 at MTI-CFTC-WEB-5-1, 5-3 (MTI Website). The minimum

participation amount was $100, or a fraction of a Bitcoin. Compi. ¶ 24; Malas Dccl. III ¶IJ 16,

21b; Malas Dccl. III Ex. 5 at MTI-CFTC-WEB-5-1 (MTI Website).

15. Steynberg, individually and as the agent of MTI, represented through social media
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 7 of 39

and MTI's websites that there were "no membership fees, no subscriptions, no packages, no

costs & no deductions." Compi. ¶ 25; Malas Deci. III ¶ 21j; Malas Dccl. III Ex. 5 at MTI-

CFTC-WEB-3-4 (MTI Website). Steynberg claimed MTI's trading "bot" achieved "profits" of

10% per month, and that the MTI Pool had never had a losing trading day except for one day.

Comp!. ¶ 25; Malas Deel. III ¶11 13, 36; Malas Deci. III Ex. 3 at MTI-FSCA-89-17 to 89-18

(FSCA Does.), Ex. 5 at MTI-CFTC-WEB-3-21, 3-84, 5-4 (MTI Website). Steynberg

represented via MTI's websites that MTI's "system is automated and does everything for you,"

and participants "will receive a statement detailing the income from the trades for the day."

Compi. ¶ 25; Malas Deci. III ¶J 16, 21b, 211; Malas Deci. III Ex. 5 at MTJ-CFTC-WEB-3-1, 5-1

to 5-3 (MTI Website).

16. Defendants provided each pooi participant access to what Defendants referred to

as a "back office," which was an online statement each participant could access using their login

credentials to view how much profit their Bitcoin investment purportedly earned in the Pool

account. Compl. ¶ 26; Malas Dee!. III ¶ 211; Malas Dee!. III Ex. 7 at MTI-CFTC-WEB-75_1-4

(MTI Social Media). Defendants advised participants that: "Your daily trade profits are

automatically compounded in the trading pool." Compi. ¶ 26; Malas Dee!. III ¶ 21m; Malas

Deci. III Ex. 7 at MTI-CFTC-WEB-75_l-4 (MTI Social Media). Steynberg also represented to

participants that they could withdraw their funds, in full or in part, at any time, and that

participants' Bitcoin would be sent to their Bitcoin wallet within 48 hours of a withdrawal

request. Compi. ¶ 26; Malas Dee!. III ¶ 21k; Malas Dee!. III Ex. 7 at MTI-CFTC-WEB-75_l-4

(MTI Social Media).

17. Steynberg testified under oath before the FSCA on July 20, 2020, that at the time

of MTI's formation in April 2019, MTI purportedly entered into a profit-sharing agreement with

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a trader named "Quintin," who was to conduct all trading on behalf of all members. Compl.

¶ 29; Malas Decl. III ¶J 29-30; Malas Decl. III Ex. 3 at MTI-FSCA-31-30 to 31-31; 89-15

(FSCA Docs.). Steynberg testified that "Quintin" purportedly used an FXChoice multi-account

manager ("MAM" account) "linked" to each participant's individual account to control the

trading in all participants' accounts. Steynberg opened and controlled the MAM account in

MTI's name at FXChoice. Compi. ¶ 29; Malas Deci. III ¶J 29-30; Malas Deci. III Ex. 3 at MTI-

FSCA-50-1 (FSCA Docs.).

18. Steynberg testified under oath before the FSCA that from April 2019 to July

2019, participants initially had their own accounts that were "linked" to the MetaTrader 4

("MT4") electronic trading platform, and MT4 traded the accounts automatically. Compl. ¶ 30;

Malas Deci. III ¶ 29; Malas Decl. III Ex. 3 at MTI-FSCA-89-3, 89-15 (FSCA Docs.). Upon

information and belief, at least 361 MTI participants held accounts in their personal name at

FXChoice, in which forex trading took place during the period April 2019 through July 2019.

Malas Deci. III ¶J 31a, 31c; id. Ex. 4 at MTI-BFSC-532, MTI-BFSC-52 to 56 (Belize

International Financial Services Commission Docs). Steynberg testified that in July 2019, due to

heavy trading losses, all participants had their purported individual accounts closed and all

Bitcoin transferred to a single pooled account controlled by Defendants. Compl. ¶ 30; Malas

Deci. III ¶ 30; Malas Deci. III Ex. 3 at MTI-FSCA-78-2 to 78-3, 89-3, 89-15 (FSCA Docs.).

Specifically, Steynberg testified:

No our members do not have access to Meta Trader, when we just started in April
last. I had it set up that every single member had his own account with the
Brokerage themselves on a mam account. And then we, we actual (sic) back then
had physical human traders and they good profit (sic) for April, May and in June
they lost about 80 percent. So I got rid of them and got the software working for
us.. .the only way not for people to steal our trades was to bring everything into a
global pooi which MTI has now and we do out (sic) trading you know, on that
pooi account.
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Compi. ¶ 30; Malas Deci. III ¶ 30; Malas Deci. III Ex. 3 at MTI-FSCA-31-30 (FSCA Docs.).

19. Following the heavy losses stained in the April to July 2019 time period,

Defendants sent a notice to each participant stating in relevant part:

Over the last couple of weeks, MTI had issues with the traders, which resulted in
losses for ourselves and the members. We have a solution to recover all member's
funds. Those willing to take the journey with us over the next few weeks will be
happily surprised with the trading system that we managed to put together for our
members. . . . At the moment, it is not possible to deploy the trading system on all
FXChoice accounts due to licensing restrictions. We are, however, allowed to use
the system in a pooled account environment. To switch to the pooled account,
please follow the steps below.
Compl. ¶ 31; Malas Dccl. III ¶ 32; Malas Decl. Ill Ex. 3 at MTI-FSCA-78-2 (FSCA Does.).

3. The MTI Pooled Account at FXChoice

20. Defendants opened a single commodity pooi account in the name of MTI at

FXChoice, account No.**4850, in August 2019. Comp!. ¶ 32; Malas Dccl. III ¶ 34; Malas Dee!.

III Ex. 3 at MTI-FSCA-94-27 (FSCA Does.). Defendants falsely represented that MTI operated

a commodity pooi that traded forex contracts and that the only assets they accepted for

investment in the Pool account was Bitcoin. Compi. ¶ 32; Malas Deci. III ¶J 8, 34; Malas Dee!.

III Ex. 3 at MTI-FSCA-94-27 (FSCA Does.). Specifically, Defendants claimed to be trading

foreign currency pairs in the Pool account, initially at FXChoice, and later purportedly at

Trade300. Compl. ¶ 32; Malas Decl. III ¶J 30, 31c, 45-48; Malas Dccl. III Ex. 3 at MTI-FSCA-

89-3 to 89-4, 89-15 (FSCA Does.), Ex. 4 at MTI-BFSC-52 to 56 (Belize International Financial

Services Commission Does). Pool participants registered via Defendants' websites, and

Defendants directed participants to transfer their Bitcoin to one of the MTI E-Wallets, which

were controlled by Steynberg. Compl. ¶ 32; Malas Dccl. III ¶J 28, 34; Malas Dccl. III Ex. 3 at

MTI-FSCA-89-14, 94-27 (FSCA Does.). Defendants then purportedly transferred the Bitcoin to

the MTI Pool account at FXChoice, and later, to an MTI Pool account at Trade300.
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Compi. ¶ 32; Malas Dccl. III ¶J 28, 33, 45-48; Malas Dccl. III Ex. 3 at MTI-FSCA-38-2 to 38-7,

78-2 to 78-3, 89-4, 89-14 (FSCA Docs). Throughout the Relevant Period, Steynberg was in sole

control of the MTI E-Wallets receiving participants' funds and controlled the movement of

Bitcoin from the MTI E-Wallets to FXChoice accounts and elsewhere. Comp!. ¶ 33; Malas

Dee!. III ¶J 34, 41c; Malas Dccl. III Ex. 3 at MTI-FSCA-89-14, 94-27 (FSCA Docs).

21. Beginning on or about August 2019, Steynberg, individually and as the agent of

MTI, represented that MTI used a high frequency artificial intelligence trading "bot," together

with a "head trader" and a "trading team," that purportedly traded the Pool's account at

FXChoice, earning large profits. Compl. ¶ 34; Malas Dccl. III ¶J 32, 35-36; Malas Dccl. III Ex.

3 at MTI-FSCA-13-3, 89-3, 89-16 to 89-17 (FSCA Does.). These representations were false.

FXChoice records show that the Pool account traded using only a small fraction of participants'

Bitcoin, that this limited trading was at an overall loss, and that Steynberg made many of the

trades via a mobile device. Compl. ¶ 34; Malas Dee!. III ¶J 13, 38; Malas Dee!. III Ex. 3 at MTI-

FSCA-36-1, 49-4, 89-4, 89-18 to 89-19 (FSCA Does).

22. After Defendants created the purported FXChoice Pool account, they provided

"trading statements" showing profitable trades on behalf of the Pool in this account. Compl.

¶ 35; Malas Dccl. III ¶J 26d, 37, 38b; Malas Dee!. III Ex. 3 at MTI-FSCA-36, 49-4, 89-18 to 89-

21 (FSCA Does). In fact, these "trading statements" were not associated with any actual pooled

accounts, but were in fact statements from a simulated "demo" account that never actually traded

forex, Bitcoin or anything else. Compi. ¶ 35; Malas Dccl. III ¶J 26d, 37-38; Malas DecI. III Ex.

3 at MTI-FSCA-36-1 to 36-4, 89-3, 89-19 to 89-2 1 (FSCA Does.). Defendants failed to disclose

to participants that all of Defendants' representations to participants regarding trading,

profitability and/or the existence of a commodity pool account were false. Comp!. ¶ 35; Malas

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Dccl. III ¶J 26a-26d; Malas Decl. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 49, 71-4, 78-1, 89-18 to

89-2 1, 89-35 to 89-36 (FSCA Docs.). Defendants further failed to disclose to participants that all

of the purported "trading statements" were false and created by Defendants. Compi. ¶ 35; Malas

Decl. III ¶j 37-38; Malas Deci. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 89-19 to 89-21 (FSCA

Does.).

4. The Final Phase of the Scheme

23. On or about June 8, 2020, FXChoice began receiving complaints from MTI

participants that the trades shown in MTI's trading reports provided to participants did not

correlate with the live trades purportedly made in MTI's Pool account. Compl. ¶ 36; Malas

Dee!. III ¶ 38; Malas Dccl. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 89-19 (FSCA Does.).

FXChoice conducted a compliance review of the MTI Pool account and determined that the

"account statements" provided to participants were actually simulated trades from "demo"

accounts created by Steynberg via the MT4 application. Compl. ¶ 36; Malas Dccl. III ¶ 38a;

Malas Dccl. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 89-19 (FSCA Does.). FXChoice further

determined that Defendants deleted any of the "demo" accounts' "losing" trades in the "account

statements" and presented only "winning trades," thereby giving the false impression to

participants that Defendants' trading "bot" was profitably trading. Comp!. ¶ 35; Malas Dccl. III

¶ 38b; Malas Dccl. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 89-19 (FSCA Does.). Finally,

FXChoice determined that a number of trades in MTI's FX Choice Pool account were manually

placed via a mobile device. Compl. ¶ 36; Malas Dccl. III ¶ 38c; Malas Dccl. III Ex. 3 at MTI-

FSCA-89-19 (FSCA Does.).

24. As a result of its compliance investigation, on June 10, 2020, FXChoice blocked

all transactions in MTI's Pool account pending a compliance review. Compl. ¶ 37; Malas Dccl.

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III ¶ 39; Malas Deel. III Ex. 3 at MTI-FSCA-36-2, 89-2 1 (FSCA Does). On July 13, 2020,

Steynberg unsuccessfully attempted to withdraw 280 Bitcoin from the blocked Pool account.

Compi. ¶ 37; Malas Deci. III ¶ 39; Malas Deel. III Ex. 3 at MTI-FSCA-36-2 (FSCA Does.).

FXChoice refused Defendants' withdrawal request and informed Defendants that they were

required to provide audited financial statements for MTI. Comp!. ¶ 37; Malas Dccl. III ¶ 39;

Ma!as Decl. III Ex. 3 at MTI-FSCA-36-2 (FSCA Does.). As a result of Defendants' failure to

provide FXChoice with the requested audited financial statements, on August 7, 2020, FXChoice

marked the Pool account No.**4850 as "fraud" and froze the 1,280 Bitcoin remaining in the

account. Compi. ¶ 37; Malas Dee!. III ¶ 39; Malas Decl. III Ex. 3 at MTI-36-2, 56-2 to 56-3, 89-

21 (FSCA Does.).

25. Subsequently, Steynberg represented to participants that MTI would transfer all of

the Pool's trading accounts from FXChoice to a purported online broker identified as Trade300.

Compl. ¶ 38; Malas Dccl. III ¶ 45; Malas Dee!. III Ex. 3 at MTI-FSCA-89-4 (FSCA Does.).

Steynberg further represented to participants that Trade300 was another online forex trading

platform, and that MTI continued to earn large profits while trading through Trade300. Compl.

¶ 38; Malas Dee!. III ¶ 45; Malas Dee!. III Ex. 3 at MTI-FSCA-89-4 (FSCA Docs.). Steynberg

testified before the FSCA that MTI' s Pool account at Trade3 00 averaged trading profits of 10%

per day, and that the MTI Pool account had never experienced a negative profit trading day.

Compl. ¶ 38; Malas Dee!. III ¶J 13, 45-46; Malas Dccl. III Ex. 3 at MTI-FSCA-89-4, 89-17

(FSCA Does.). Upon information and belief, Trade300 is a fictious trade broker created by

Steynberg to further the fraudulent scheme. Compl. ¶ 38; Malas Dee!. III ¶ 47; Malas Dccl. III

Ex. 3 at MTI-FSCA-89-23 to 89-31 (FSCA Does.), Ex. 5 at MTI-CFTC-WEB-73 (MTI

Website).

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Defendants' Misappropriation and Commin2lin2 of Participants' Funds

26. Steynberg, individually and as the agent of MTI, misappropriated pool

participants' funds by soliciting funds for trading on behalf of the Pool and then depositing and

holding participants' funds in E-Wallets controlled by Steynberg instead of segregating the funds

in a pooi account and using the funds to trade on behalf of the Pool's participants. Compi. ¶ 39;

Malas Decl. III ¶J 14, 23-25; Malas Decl. III Ex. 3 at MTI-FSCA-65-6 to 65-9, 78-1, 89-16 to

89-18 (FSCA Docs.).

27. Throughout the Relevant Period, participants sent 29,421 Bitcoin to Defendants'

E-Wallets as instructed. Compi. ¶ 40; Malas Deci. III ¶J 8, 10, 24, 41c; Malas Deci. III Ex. 3 at

MTI-FSCA-49-1 to 49-3, 78-1, 89-18 (FSCA Docs.). However, Defendants deposited only

1,846.72 of participants' 29,421 Bitcoin into the FXChoice Pool account. Comp!. ¶ 40; Malas

Deci. III ¶J 12, 24, 41c; Malas Deci. III Ex. 3 at MTI-FSCA-36-1, 46-3, 49-1 to 49-3, 78-1, 89-

18 (FSCA Docs.). Defendants never deposited the remaining 27,574 Bitcoin into the FXChoice

Pool account or any account at Trade300, and failed to use those funds for any trading on behalf

of participants. Comp!. ¶ 40; Malas Decl. III ¶ 12, 14, 24-25; Malas Deci. III Ex. 3 at MTI-

FSCA-46-3, 49-1 to 49-3, 78-1, 89-18 (FSCA Docs.). Instead, Steynberg, individually and as

the agent of MTI, misappropriated participants' Bitcoin for his personal use. Compi. ¶ 40; Malas

Deci. III ¶J 14, 23-25; Malas Deci. III Ex. 3 at MTI-FSCA-46-3, 49-1 to 49-3, 65-6 to 65-9, 78-

1, 89-18 (FSCA Docs.).

28. Defendants also misappropriated some of participants' funds by providing Bitcoin

to certain participants as purported trading "profits" or "bonuses" in order to create the illusion

that the Pool was trading and trading profitably. Compi. ¶ 41; Malas Dccl. III ¶J 14, 23; Malas

Dccl. III Ex. 3 at MTI-FSCA-49-1 to 49-3 (FSCA Docs.).

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 14 of 39

29. At no time did Defendants create, or MTI operate, the Pool as an entity

cognizable as a legal entity separate from the pooi operator, MTI. As a result, at no time were

any assets, in this case Bitcoin, from pool participants received in the Pool's name because a

separate legal entity in the name of the Pool was never created. Compl. ¶ 42; Malas Dccl. III

¶J 7a, 9, 10, 22, 24-25; Malas Decl. III. Ex. 1 at MTI-NFA-2-1, 5-1 to 5-2, 6-1 to 6-2 (NFA

Certs.), Ex. 2 at MTI-TSSB-68-9 (TSSB Docs.), Ex. 3 at MTI-FSCA-89-35 (FSCA Does.).

30. During the Relevant Period, Defendants, by and through Steynberg, failed to

maintain pool assets separately from Steynberg's own funds. Compl. ¶ 43; Malas Dec!. III

¶ 26b; Malas Dccl. III Ex. 3 at MTI-FSCA-49-1 to 49-3, 65-6 to 65-9, 89-3 5 to 89-36 (FSCA

Docs.). Steynberg, individually and as the agent of MTI, commingled pool participants' assets

with personal funds of Steynberg. Compl. ¶ 43; Malas Dccl. III ¶J 23-25; Malas Dccl. III Ex. 3

at MTI-FSCA-46-3, 49-1 to 49-3, 65-6 to 65-9, 78-1, 89-18 (FSCA Docs.). Defendants held

participants' assets in Steynberg's personal E-Wallets instead of segregating them in a pooi

account. Compi. ¶ 43; Malas Deci. III ¶J 25, 26b, 41c, 42-44; Malas Decl. III Ex. 3 at MTI-

FSCA-36-1, 49-1 to 49-3, 65-6 to 65-9, 78-1, 89-35 to 89-36 (FSCA Docs.).

Defendants' Material Omissions and Misrepresentations of Material Facts

31. Tn furtherance of the fraudulent scheme, Defendants knowingly made material

omissions of fact in solicitations and other communications with actual and prospective pooi

participants, including by failing to disclose that:

a. Defendants misappropriated pool participants' funds by soliciting funds for trading and
then retaining participants' funds in Steynberg's personal E-Wallets instead of
segregating the funds in a pool account and using the funds to trade on behalf of the Pool.
Compi. ¶ 44a; Malas Decl. III ¶J 23-25, 26b; Malas Decl. III Ex. 3 at MTI-FSCA-46-3,
49-1 to 49-3, 65-6 to 65-9, 78-1, 89-18, and 89-35 to 89-36 (FSCA Docs.);

14
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 15 of 39

b. There was no trading "bot" successfully trading on behalf of participants. Compl. ¶ 44b;
Malas Dec!. III ¶J 13, 26a; Malas Deci. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 49-1 to 49-
3, 7 1-4, 89-18 (FSCA Does.);

No profitable trading in forex, or anything else, took place on behalf of pool participants.
Compi. ¶ 44c; Malas Dee!. III ¶J 13, 26a-26d, 38; Malas Dec!. III Ex. 3 at MTI-FSCA-
36-1 to 36-4, 49-1 to 49-3, 71-4, 89-19 to 89-21 (FSCA Does.);

d. "Account statements" provided to participants were actually simulated trades from

"demo" accounts created via the MT4 application. Compl. ¶ 44d; Malas Dee!. III ¶IJ 26d,
38a; Malas Decl. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 89-19 to 89-2 1 (FSCA Does.);

The broker Trade300 did not exist and was created by Steynberg to further the fraudulent
scheme. Compl. ¶ 44e; Malas Deel. III ¶ 47; Malas Dee!. III Ex. 3 at 89-23 to 89-31
(FSCA Does.), Ex. 5 at MTI-CFTC-WEB-73 (MTI Website); and,

f. Purported "returns" paid to some pool participants were in fact the principal deposits of
other participants and were not generated by profitable trading. Compi. ¶ 44f Malas
Dee!. III ¶ 26e; Malas Dee!. III Ex. 3 at MTI-FSCA-49-1 to 49-3, 89-18 (FSCA Does.).

32. Similarly, during the Relevant Period, Defendants, by and through Steynberg,

misrepresented, among other things, that:

a. Pool participants' Biteoin would be pooled and used to trade forex contracts on
participants' behalf. Compl. ¶ 45a; Malas Dee!. III ¶J 13, 23-25, 26a to 26d, 38; Malas
Deel. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 46-3, 49-1 to 49-3, 65-6 to 65-9, 7 1-4, 78-1,
89-18, 89-35 to 89-36 (FSCA Does.), Ex. 5 at MTI-CFTC-WEB-5-1 (MTT Website);

b. Profits were achieved through trading. Comp!. ¶ 45b; Malas Dee!. III ¶J 13, 26a-26d, 38;
Malas Dee!. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 46-3, 49-1 to 49-3, 65-6 to 65-9, 7 1-4,
78-1, 89-18, 89-35 to 89-36 (FSCA Does.), Ex. 5 at MTI-CFTC-WEB-5-1 (MTI
Website); and

e. Trading "profits" were distributed to participants. Comp!. ¶ 45c; Malas Dee!. III ¶J 13,
26a-26d, 38; Malas Dee!. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 46-3, 49-1 to 49-3, 65-6
to 65-9, 7 1-4, 78-1, 89-18, 89-35 to 89-36 (FSCA Does.).

33. These representations were false because Defendants deposited only a small

portion of participants' Bitcoin into the FXChoice Pool account for a limited time period.

Compl. ¶ 46; Malas Dee!. III ¶IJ 12, 24, 41e; Malas Dee!. III Ex. 3 at MTI-FSCA-36-1 to 36-4,

46-3, 49-1 to 49-3, 78-1, 89-18 (FSCA Does.). The FXChoice Pool account never traded

15
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 16 of 39

profitably, there was no Trade300 account, and there were no profits to distribute to participants.

Compl. ¶ 46; Malas Deci. III ¶J 13, 23-25, 26a-26d, 38, 46; Malas Decl. III Ex. 3 at MTI-FSCA-

36-1 to 36-4, 49-1 to 49-3, 65-6 to 65-9, 71-4, 89-18 to 89-19, 89-25, 89-29, 89-35 to 89-36

(FSCA Docs.), Ex. 5 at MTI-CFTC-WEB-73 (MTI Website).

Defendants' Failure to Resister

34. During the Relevant Period, MTI acted in a capacity as a CPO by soliciting,

accepting, and receiving funds, securities, or property, in this case Bitcoin, from the public while

engaged in a business that is of the nature of an investment trust, syndicate, or similar form of

enterprise, for the purpose of, among other things, trading in forex, without being registered with

the CFTC as a CPO. Compi. ¶ 47; Malas Decl. III ¶J 7a, 8, 26e; Malas Decl. III Ex. 1 at MTI-

NFA-2-1, 5-1 to 6-2 (NFA Certs.).

35. Throughout the Relevant Period, Steynberg acted in a capacity as an AP of MTI

by, in his capacity as a partner, officer, employee, consultant or agent of the CPU MTI, soliciting

or supervising the solicitation of funds for participation in the Pool, without being registered with

the CFTC as an AP of a CPU. Compl. ¶ 48; Malas Decl. III ¶J 7b, 8, 26e; Malas Deci. III Ex. 1

at MTI-NFA-2-1, 7-1 to 8-2 (NFA Certs.).

36. On or about July 7, 2020, the Texas State Securities Board ("TSSB") issued a

Cease and Desist Order against Steynberg and MTI, among others, finding their solicitations

were materially misleading, and that they were operating a fraudulent MLM scheme involving

digital assets and forex, which had defrauded Texas residents. Compl. ¶ 49; Malas Decl. III ¶ 9;

Malas Deci. III Ex. 2 at MTI-TSSB-68-1 to 68-17 (TSSB Docs.). The TSSB ordered Steynberg

and MTI to immediately cease and desist all operations in the State of Texas. Compl. ¶ 49;

Malas Deci. III ¶ 9; Malas Decl. III Ex. 2 at MTI-TSSB-68-16 to 68-17 (TSSB Does.). Despite
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 17 of 39

the issuance of this Order, upon information and belief Defendants continued to unlawfully

solicit residents in Texas. Compi. ¶ 49; Malas Dccl. III ¶ 9.

B. Conclusions of Law

1. Defendant's Failure to Properly Answer Warrants Entry of Default

Judgment

37. Fed. R. Civ. P. 55 authorizes a default judgment when "a party against whom a

judgment for affirmative relief is sought has failed to plead or otherwise defend." Fed. R. Civ. P.

55(a). A default judgment issued by a court pursuant to Fed. R. Civ. P. 55(b)(2) after the court

clerk's entry of default is within the trial court's sound discretion. Gonzales v. Smitty, No. 1:20-

cv-0605, 2021 WL 8055637, at *2 (W.D. Tex. Oct. 7, 2021) (citing Mason v. Lister, 562 F.2d

343, 345 (5th Cir. 1977)). lii making the determination of whether a default judgment is

warranted, district courts in the Fifth Circuit utilize a three-step analysis: (1) whether default

judgment is procedurally proper, based upon six factors identified in Lindsey v. Prive Corp. 161

F.3d 886 (5th Cir. 1998); (2) if procedurally proper, "whether the plaintiffs' claims are

substantively meritorious;" and (3) if substantively meritorious, whether the requested relief is

appropriate. CFTC v. Ramirez, No. 4:19-cv-140, 2019 WL 4198857, at *7 (S.D. Tex. July 17,

2021) (default order) (quoting Travelers Cas. & Sur. Co. ofAm. v. HighMark Constr. Co., LLC,

No. 7:16-cv-00255, 2018 WL4334016, at *2 (S.D. Tex. May 5,2018)). All of these elements

weigh in favor of the entry of default judgment. The well-pleaded facts of the Complaint

establish Defendant's liability, and the evidence submitted by the CFTC establishes the

appropriate amount of restitution and civil monetary penalty to be awarded.

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 18 of 39

2. Jurisdiction and Venue

38. The Court has jurisdiction over has jurisdiction over this action pursuant to 7

U.S.C. § 1 3a- 1, which provides that whenever it shall appear to the CFTC that any person has

engaged, is engaging, or is about to engage in any act or practice constituting a violation of any

provision of the Act or any rule, regulation, or order promulgated thereunder, the CFTC may

bring an action in the proper district court of the United States against such person to enjoin such

act or practice, or to enforce compliance with the Act, or any rule, regulation or order thereunder.

39. Venue properly lies with this Court pursuant to 7 U.S.C. § 13a-1(e), because the

Defendants transacted business in this jurisdiction and the acts and practices in violation of the

Act and Regulations occurred within this District, among other places.

3. Steynberg Violated 7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b)(1)-(3)

(2022) (Count I: Fraud in Connection with Forex Contracts)

40. 7 U.S.C. § 6b(a)(2)(A)-(C) of the Act makes it unlawful for any person: (A) to

cheat or defraud or attempt to cheat or defraud another person; (B) willfully to make or cause to

be made to the other person any false report or statement or willfully to enter or cause to be

entered for the other person any false record; or (C) willfully to deceive or attempt to deceive

another person by any means whatsoever in connection with certain off-exchange commodity

contracts. Pursuant to 7 U.S.C. § 2(c)(2)(C)(iv), 7 U.S.C. § 6b applies to the forex agreements,

contracts, or transactions offered by Defendants "as if' they were contracts of sale of a
commodity for future delivery. Further, 7 U.S.C. § 2(c)(2)(C)(ii)(I) makes the forex agreements,

contracts, or transactions at issue here "subject to" 7 U.S.C. § 6b. Finally, 7 U.S.C.

§ 2(c)(2)(C)(vii) makes clear that the CFTC has jurisdiction over an account or pooled

investment vehicle that is offered for the purpose of forex transactions described in 7 U.S.C.

§ 2(c)(2)(C)(i).

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 19 of 39

41. In substantially identical language to 7 U.S.C. § 6b(a)(2)(A)-(C), 17 c.F.R.

§ 5.2(b)(1)-(3) (2022) makes it unlawful for any person, by use of the mails or any means or

instrumentality of interstate commerce, directly or indirectly, in or in connection with any retail

forex transaction: (1) to cheat or defraud or attempt to cheat or defraud any person; (2) willfully

to make or cause to be made to any person any false report or statement or cause to be entered

for any person any false record; or (3) willfully to deceive or attempt to deceive any person by

any means whatsoever. However, unlike in 7 U.S.C. § 6b(a)(2)(A)-(C), 17 C.F.R. § 5.2(b)(1)-(3)

(2022) requires that the acts or omissions involve "instrumentalities of interstate commerce."

Here, Defendants used instrumentalities of interstate commerce, including emails and websites,

to fraudulently solicit, misrepresent, or omit material facts, misappropriate funds, and provide

false trading account statements to participants. Compl. ¶J 1, 3, 22, 32; Malas Dccl. III ¶J 13-21,

23-26, 36-38; Malas Dee!. III Ex. 2 at MTI-TSSB-68-1 to 68-17 (TSSB Does.), Ex. 3 at MTI-

FSCA-36-1 to 36-4, 49-1 to 49-3, 65-1 to 65-9, 89-3 to 89-36 (FSCA Does.), Ex. 5 at MTI-

TSSB-204-1 to 204-3 (TSSB Does.), Ex. 7 at MTI-CFTC-WEB-7-i to 7-3, 75_i to 77_l-6 (MTI

Social Media).

i. Steynberg Committed Fraud by Making Omissions and

Misrepresentations of Material Fact

1. Omissions and Misrepresentations

42. To establish liability for fraud based on misrepresentations and omissions under 7

U.S.C. § 6b(a)(2)(A)-(C), the CFTC must prove that: (1) a misrepresentation, false or

misleading statement, or deceptive omission was made; (2) with scienter; and (3) the

misrepresentation, false or misleading statement, or deceptive omission was material. R.i

Fitzgerald, 310 F.3d at 1328; see also In re Slusser, CFTC No. 94-14, 1999 WL 507574, at *9

(July 19, 1999) (holding that CFTC's findings regarding fraud were supported by substantial

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 20 of 39

evidence), aff'd and remanded on other grounds sub nom., Slusser v. CFTC, 210 F.3d 783, 785-

86 (7th Cir. 2000). Similarly, 17 C.F.R. § 5.2(b)(l)-(3) (2022) makes it unlawful, in connection

with off-exchange retail forex transactions, to use the mails or any means or instrumentality of

interstate commerce to cheat or defraud or attempt to cheat or defraud any person, or willfully

deceive any person by any means. CFTC v. Alcocer, No. 1:12-cv-23459, 2013 WL 12104892, at

*9 (S.D. Fla. Apr. 5, 2013) (default order).

43. When determining whether a misrepresentation has been made, one must look to

the "overall message" and the "common understanding of the information conveyed." R.J.

Fitzgerald, 310 F.3d at 1328 (internal quotation marks and citation omitted). "Any guarantee of

profit and assurance against loss in the context of futures trading is inherently a fraudulent

misrepresentation because investments in futures transactions necessarily depend on speculative

predictions about an unpredictable future and risk is unavoidable." CFTC v. Std. Forex, Inc., No.

1:93-cv-88, 1993 WL 809966, at *21 (E.D.N.Y. Aug. 9, 1993). Failure to inform customers

about the inherent risks associated with trading commodity option contracts "while projecting

large profits amounts to fraud." CFTC v. Commonwealth Fin. Grp., 874 F. Supp. 1345, 1354

(S.D. Fla. 1994); see also CFTC v. Weinberg, 287 F. Supp. 2d 1100, 1107 (C.D. Cal. 2003)

(finding that "by guaranteeing profits to his investors, [defendant] made material

misrepresentations that constitute fraud under Sections 4b(a)(i) and (iii) of the Act").

44. During the Relevant Period, Steynberg committed fraud, including by making

omissions and misrepresentations of material fact to attract and retain participants to enter into

forex transactions in violation of 7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b)(1)-(3)

(2022). Compl. ¶ 54; Malas Deci. III ¶J 9, 26; Malas Deci. III Ex. 2 at MTI-TSSB-68-1 to 68-17

(TSSB Docs.), Ex. 3 at MTI-FSCA-36-1 to 36-4, 49-1 to 49-3, 65-6 to 65-9, 71_4, 89-18 to 89-

20
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 21 of 39

21, 89-35 to 89-36 (FSCA Docs.). Steynberg failed to disclose, among other things, that: (1)

Defendants misappropriated pooi participants' funds by soliciting funds for trading and then

retaining participants' funds in Steynberg's personal E-Wallets instead of segregating the funds

in a pooi account and using the funds to trade on behalf of participants as promised; (2)

Defendants were not registered with the CFTC as CPOs and as an AP of a CPO, respectively, as

required by the Act and were therefore operating an unlawful business enterprise; and

(3) purported "returns" paid to some participants were in fact the principal deposits of other

participants. Compl. ¶ 44; Malas Dee!. III ¶ 26; Malas Dee!. III Ex. 3 at MTI-FSCA-36-1 to 36-

4, 49-1 to 49-3, 65-6 to 65-9, 71_4, 89-18 to 89-21, 89-35 to 89-36 (FSCA Does.).

45. Similarly, during the Relevant Period, Steynberg has misrepresented, among other

things, that: (1) pooi participants' Bitcoin would be pooled and used to trade binary options

contracts for the benefit of participants; (2) profits were achieved through trading; and (3) trading

profits were distributed to participants. Compl. ¶ 45; Ma!as Dee!. III ¶J 13, 22-25, 26a-26d, 38;

Malas Dee!. III Ex. 3 at MTI-FSCA-36-1 to 36-4, 46-3, 49-1 to 49-3, 65-6 to 65-9, 71-4, 78-1,

89-3 to 89-4, 89-17 to 89-21, 89-35 to 89-36 (FSCA Does.), Ex. 5 at MTI-CFTC-WEB-3-1, 3-

3(MTI Website). These representations were false because only a small portion of participants'

Bitcoin was deposited into the FXChoice Pool account for a limited time period; the FXChoiee

Pool account never traded profitably; and there were no profits to distribute to participants.

Compl. ¶ 46; Ma!as Dee!. III ¶J 11-12, 22-26d, 37, 40c, 46; Malas Dee!. III Ex. 3 at MTI-FSCA-

36-1 to 36-4, 50-1, 71-4, 89-3 to 89-4, 89-18 to 89-19, 89-35 to 89-36 (FSCA Does.).

2. Scienter

46. To establish the scienter element of fraud, the CFTC must show that Steynberg's

conduct was either reckless or intentional. "Proof of scienter requires evidence that a Defendant

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 22 of 39

committed the alleged wrongful acts intentionally, or that the representations were made with a

reckless disregard for their truth or falsity." CFTC v. Driver, 877 F. Supp. 2d 968, 977 (C.D.

Cal. 2012) (internal citations and quotations omitted); see also CFTC v. Noble Metals Int'l, Inc.,

67 F.3d 766, 774 (9th Cir. 1995) (holding that scienter is established when defendants act

intentionally or with "careless disregard"); CFTC v. Nat '1 Invest. Consultants, Inc., No. 3: 05-cv-

02641, 2005 WL 2072105, at *8 (N.D. Cal. Aug. 26, 2005) (holding that CFTC can establish

scienter by showing that a defendant "knew the representations were false and were calculated to

cause harm" or by showing "the representations were made with a reckless disregard for their

truth or falsity") (citing CFTC v. Noble Wealth Data Info. Servs., Inc., 90 F. Supp. 2d 676, 686

(D. Md. 2000), aff'd in part, vacated in part, sub nom. CFTC v. Baragosh, 278 F.3d 319 (4th

Cir. 2002)). The CFTC need not prove "an evil motive or intent to injure a customer." Cange v.

Stotler & Co., 826 F.2d 581, 589 (7th Cir. 1987).

47. Steynberg, individually and as principal and agent of MTI, knew that he was

making omissions and misrepresentations to actual and prospective participants when he touted

his trading experience and profitable trading. Compl. ¶J 44-45; Malas Deci. III ¶J 13, 26c, 38b;

Malas Decl. III Ex. 3 at MTI-FSCA-49-1 to 49-3, 89-17 to 89-18 (FSCA Docs.), Ex. 5 at MTI-

CFTC-WEB-3-2 1, 5-4 (MTI Website). In reality, Steynberg knew or acted with reckless

disregard of the fact that he unprofitably traded only a small portion of the 29,421 Bitcoin he

accepted from participants, and that he misappropriated the remaining Bitcoin. Compi. ¶J 39-43,

46; Malas DecI. 111 ¶J 12-13, 24-25, 41c; Malas DecI. Ill Ex. 3 at MTI-FSCA-36-1 to 36-4, 46-3,

49-1 to 49-3, 65-6 to 65-9, 78-1, 89-17 to 89-18 (FSCA Docs.). As the holder of the E-Wallets

and Bitcoin addresses used to collect funds from participants, and the person in control of the

Pool account at FXChoice who received actual account statements, Steynberg had personal

22
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 23 of 39

knowledge of the amount of funds accepted from participants and the disposition of those funds,

as well as the absence of trading on behalf of participants as promised. Compl. ¶J 32-33; Malas

Deci. III ¶J 8, 30, 34, 41c; Malas Deci. III Ex. 3 at MTI-FSCA-3 1-30, 36-1 to 3 6-4, 49-3, 78-1 to

78-3, 89-3, 89-15, 89-18 (FSCA Docs.). Finally, Steynberg knew or acted in reckless disregard

of the facts when he failed to disclose that neither he nor MTI were registered with the CFTC as

required, and Defendants were therefore operating an unlawful business enterprise. Compl.

¶J 47-48; Malas DecI. III ¶J 7, 26e; Malas Decl. III Ex. 1 at MTI-NFA-2-1, 5-1 to 8-2 (NFA

Certs.).

3. Materiality

48. A statement is material if "there is a substantial likelihood that a reasonable

investor would consider the information important in making a decision to invest." In re R& W

Tech. Servs. Ltd., CFTC No. 96-3, 1999 WL 152619, at *21 (Mar. 16, 1999), aff'd inpartR&W

Tech. Serv. Ltd. v. CFTC, 205 F.3d 165 (5th Cir. 2000); see also R.i Fitzgerald, 310 F.3d at

1328-29; CFTC v. Matrix Trading Grp., Inc., No. 9:00-cv-8880, 2002 WL 31936799, at *6 (S.D.

Fla. Oct. 3, 2002) (finding defendants misrepresented and omitted material facts concerning

likelihood and extent of profits to be made trading commodity options, risks inherent in trading

such options, and actual performance record in trading commodity options). Any fact that

enables an investor to assess independently the risk inherent in their investment and the

likelihood of profit is a material fact. See Driver, 877 F. Supp. 2d at 977 (finding

"[m]isrepresentations of profit and risk are material"); Matrix Trading Grp., 2002 WL

31936799, at *6 (finding misstatements and omissions regarding "profit potential, risk of loss,

and performance record" were material because "a reasonable investor would have relied on

these statements in determining whether to invest"). "Misrepresentations as to the trading record

23
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 24 of 39

and experience of a firm or broker are fraudulent because past success and experience are

material factors to reasonable customers." CFTC v. Next Fin. Servs. Unlimited, No. 9:04-cv-

80562, 2006 WL 889421, at *4 (S.D. Fla. Mar. 30, 2006). Furthermore, misrepresentations

regarding profitability are material because customers or potential customers are likely to rely on

such information when making their investment decisions. See Commonwealth Fin. Grp., Inc.,

874 F. Supp. at 1354.

49. As outlined above, Steynberg, individually and as principal and agent of MTI,

made materially false and misleading statements or omissions of facts to participants. Compi.

¶11-5; Malas Dccl. III ¶11 7b, 9, 26; Malas Dccl. III Ex. 1 at MTI-NFA-2-1, 7-1 to 8-2 (NFA

Certs.), Ex. 2 at MTI-TSSB-68-1 to 68-17 (TSSB Docs.), Ex. 3 at MTI-FSCA-36-1 to 36-4, 49-1

to 49-3, 65-6 to 65-9, 71-4, 89-19 to 89-21, 89-35 to 89-36 (FSCA Does.). In order to conceal

and continue the fraudulent scheme, Steynberg made, individually and as the agent of MTI,

numerous representations to participants as to why Defendants were not paying profits.

Steynberg's omissions and misrepresentations were material because they impacted the

participants' decisions to invest, remain in the Pool, or make additional investments.

ii. Steynberg Committed Fraud by Misappropriation

50. The CFTC may also prove fraud if it can show that a person or entity

misappropriated customer funds. See Noble Wealth Data, 90 F. Supp. 2d at 687

(misappropriation of customer funds, by diverting them to pay for operating and personal

expenses, salaries and other expenses, constituted willful and blatant fraudulent activity).

Misappropriation of customer funds in connection with forex trading constitutes fraud in

violation of 7 U.S.C. § 6b(a)(2)(A) and (C). See Driver, 877 F. Supp. 2d at 978 (finding that

"[sjoliciting or obtaining funds from investors for trading, then failing to trade the funds while

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 25 of 39

using them for personal and business expenses, is misappropriation" and granting summary

judgment to CFTC on claims that CPO's misappropriation of customer funds violated 7 U.s.c.

§ 6b and 6o); Weinberg, 287 F. Supp. 2d at 1106 ("Defendant's misappropriation of funds

entrusted to him for trading purposes is 'willful and blatant fraudulent activity' that clearly

violates Section 4b(a) of the Act." (quoting Noble Wealth Data, 90 F. Supp. 2d at 687)); CFTC v.

Giddens, No. 1:11-cv-2038, 2013 WL 12244536, at *9 (N.D. Ga. Jan. 31, 2013) ("[A]

'misappropriation' of investor funds must involve, at a minimum, the intentional taking or use of

an investor's money in violation of the terms agreed to by the investor.").

51. Here, Steynberg misappropriated participants' Bitcoin by soliciting Bitcoin for

trading and then holding participants' Bitcoin in his personal E-Wallets instead of segregating

the assets in a pool account and using the funds to trade forex contracts on behalf of participants

as promised. Compl. ¶IJ 39; 43; Malas Decl. III ¶J 14, 23-25; Malas Decl. III Ex. 3 at MTI-

FSCA-49-1 to 49-3, 65-6 to 65-9, 78-1, 89-18 (FSCA Docs.), Ex. 5 at MTI-CFTc-WEB-3-1, 3-3

(MTI Website). Upon information and belief, Steynberg also misappropriated the majority of

participants' Bitcoin by using the principal deposits of certain participants to pay other

participants in the manner of a Ponzi scheme. Compi. ¶J 6, 41; Malas Deci. III ¶J 14, 23, 26c.

His conduct constitutes willful and fraudulent activity in violation of 7 u.s.c. § 6b(a)(2)(A)-(C)

and 17 c.F.R. § 5.2(b)(1)-(3) (2022). See CFTCv. Skorupskas, 605 F. Supp. 923, 932 (E.D.

Mich. 1985) (finding defendant violated 7 u.s.c. § 6b when she misappropriated pooi funds by

soliciting funds for trading and then trading only a small percentage of those funds, while

disbursing the rest of the funds to pool participants, herself, and her family); In re Slusser, 1999

WL 507574, at * 12 (finding respondents violated 7 u.s.c. § 6b by surreptitiously retaining pool

money in their own bank accounts that should have been traded on behalf of participants).

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b. Steynberg Violated 7 U.S.C. § 6o(1)(A), (B) (Count II: Fraud by an

AP of a CPO)

52. 7 U.s.c. § 6o(1)(A), (B), in relevant part, makes it unlawful for an AP of a CPU,

by use of the mails or any other means of interstate commerce, directly or indirectly, to: (A)

employ any device, scheme, or artifice to defraud any participant; or (B) engage in any

transaction, practice, or course of business that operates as a fraud or deceit upon any participant.

"[7 U.S.C. § 6o(1)(A), (B)] of the Act broadly prohibits fraudulent conduct by a commodity

Pool Operator" and "applies to all cPOs [and APs] whether registered, required to be registered,

or exempted from registration." Weinberg, 287 F. Supp. 2d at 1107-08 (citing CFTC ex rel.

Kelley v. Skorupskas, 605 F. Supp. 923, 932 (E.D. Mich. 1985)). Unlike 7 U.S.C. § 6o(1)(A) of

the Act, the language of 7 U.S.C. § 6o(1)(B) does not require scienter as a prerequisite for

establishing liability. See, e.g., Commodity Trend Serv., Inc. v. CFTC, 233 F.3d 981, 993 (7th

Cir. 2000); Messer v. E.F. Hutton & Co., 847 F.2d 673, 678-79 (11th Cir. 1988); First Nat'!

Monetary Corp. v. Weinberger, 819 F.2d 1334, 1342 (6th Cir. 1987).

53. The same conduct that constitutes violations of 7 U.S.C. § 6b(a)(2)(A)-(C)

described above (i.e., Steynberg's misrepresentations and omissions) also constitutes violations

of 7 U.S.C. § 6o(l)(A), (B). See Weinberg, 287 F. Supp. 2d at 1108 (finding the "same conduct"

by defendant that violates 7 U.S.C. § 6b(a)(2)(A)-(C) also violates 7 U.S.C. § 6o(l)(A), (B)).

Even if the CFTC was unable to prove that Steynberg, individually and as principal and agent of

MTI, had the requisite scienter under 7 U.S.C. § 6o(l)(A) (which is highly unlikely in light of

the alleged facts), the evidence is more than sufficient to show that Steynberg's actions operated

as a fraud or deceit upon participants in violation of 7 U.S.C. § 6o(1)(B).

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 27 of 39

c. Defendants Violated 17 C.F.R. § 4.20(a)(1), (b), and (c) (2022) (Count

III: Failure to Operate Commodity Pool as a Separate Legal Entity,
Failure to Receive Funds in the Pool's Name, and Commingling of
Pool Funds)

54. With certain specified exceptions and exemptions not applicable here, 17

C.F.R. § 4.20(a)(1) (2022) provides that a CPU must operate its pool "as an entity cognizable as

a legal entity separate from that of the pooi operator." MTI, who operated the Pool at issue,

maintained no distinction between itself and the Pool and failed to establish the Pool as a

separate legal entity. Compi. ¶ 42; Malas Deci. III ¶J 9, 11, 25-26; Malas Decl. III. Ex. 1 at

MTI-NFA-2-1, 5-1 to 6-2 (NFA Certs.), Ex. 2 at MTI-TSSB-68-9 (TSSB Docs.), Ex. 3 at MTI-

FSCA-36-1 to 36-4, 49-1 to 49-3, 56-2 to 56-3, 65-6 to 65-9, 7 1-4, 78-1, 89-18 to 89-2 1, 89-35

to 89-36 (FSCA Docs). As a result, MTI, and Steynberg by extension as a controlling person of

MTI, violated 17 C.F.R. § 4.20(a)(1) (2022).

55. In failing to establish the Pool as a separate legal entity, Defendants also violated

17 C.F.R. § 4.20(b) (2022), which requires all funds, securities, or other property received by a

CPU from pooi participants to be "received in the pool's name." As Defendants unlawfully

failed to create and maintain the Pool as a separate legal entity, at no time were Bitcoin from

pool participants "received in the pool's name." Compl. ¶ 42; Malas Decl. III ¶J 9, 11, 25-26;

Malas Decl. III Ex. 1 at MTI-NFA-2-1, 5-1 to 6-2 (NFA Certs.), Ex. 2 at MTI-TSSB-68-9 (TSSB

Docs.), Ex. 3 at MTI-FSCA-36-1 to 36-4, 49-1 to 49-3, 56-2 to 56-3, 65-6 to 65-9, 7 1-4, 78-1,

89-18 to 89-2 1, 89-35 to 89-36 (FSCA Docs.). MTI, and Steynberg by extension as a controlling

person of MTI, therefore violated 17 C.F.R. § 4.20(b) (2022) when they accepted pooi

participants' Bitcoin.

56. Finally, Defendants violated 17 C.F.R. § 4.20(c) (2022), which prohibits a CPO

from commingling the property of the pooi with the property of any other person. While acting

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as a CPO, MTI, and Steynberg by extension as a controlling person of MTI, violated 17

C.F.R. § 4.20(c) (2022) by commingling pooi participants' Bitcoin with Steynberg's own

personal assets. Compi. ¶ 43; Malas Deci. III ¶J 23-25; Malas Decl. III Ex. 3 at MTI-FSCA-49-

1 to 49-3, 65-6 to 65-9, 78-1, 89-18 (FSCA Docs.), Ex. 5 at MTI-CFTC-WEB-3-1, 3-3 (MTI

Website).

d. Steynberg Violated 7 U.S.C. § 2(c)(2)(C)(iii)(I)(cc) and 6k(2) and 17

C.F.R. § 5.3(a)(2)(ii) (2022) (Count IV: Failure to Register as an AP
of a CPO)

57. 7 U.S.C. § la(l1) defines a CPO as, among other things, any person engaged in a

business that is of the nature of a commodity pooi and who solicits, accepts, or receives from

others funds, securities, or property for the purpose of trading commodity interests.3 For the

purposes of retail forex transactions, a co is defined in 17 c.F.R. § 5.1(d)(1) (2022) as "any

person who operates or solicits funds, securities, or property for a pooled investment vehicle that

is not an eligible contract participant as defined in section 1 a( 18) of the Act, and who engages in

retail forex transactions." MTI was not an ECP as defined in Section la(18) of the Act, 7 U.S.C.

§ la(1 8). During the Relevant Period, MTI acted as a retail forex CPO by soliciting, accepting,

or receiving participant funds, securities, or property (in the form of Bitcoin), for the purpose of

trading in commodity interests, including without limitation, forex pairs, purportedly first at

FXChoice and subsequently at the alleged entity Trade300. Accordingly, the Bitcoin accepted

The Bitcoin Defendants received from participants were "funds" as that term is used in 7
U.S.C. § la(1 1). See United States v. Murgio, 209 F. Supp. 3d 698, 707-08 (S.D.N.Y. 2016)
(applying ordinary meaning of "funds" from dictionary where, as here, that term was not defined
in the relevant statute, and holding that "funds" means "money," which in turn is defined as
"something generally accepted as a medium of exchange, a measure of value, or a means of
payment," and concluding that "bitcoins are funds") (citations omitted). Alternatively, the
Bitcoin solicited and received by Defendants were "property" for purposes of 7 U.S.C. § la(11).
See I.R.S. Notice 2014-21, at 2 (Apr. 14, 2014) (stating that for federal tax purposes "virtual
currency is treated as property").
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 29 of 39

by Defendants meets the definition of "funds, securities, or property" for a pooled investment.

See, e.g., CFTC v. Doe 1, No. 4:18-cv-807, 2019 WL 3926809, at *14 (N.D. Tex. June 28, 2019)

(default order).

58. 17 C.F.R. § 1.3 (2022) defines an AP of a CPU as any person who is associated

with a CPO as a partner, officer, employee, consultant, or agent (or any natural person occupying

a similar status or performing similar functions), in any capacity which involves: (i) the

solicitation of funds, securities, or property for a participation in a commodity pool; or (ii) the

supervision of any person or persons so engaged. Further, pursuant to 17 C.F.R. § 5.l(d)(2)

(2022), any person associated with a CPO as "a partner, officer, employee, consultant or agent

(or any natural person occupying a similar status or performing similar functions), in any

capacity which involves: (i) [t]he solicitation of funds, securities, or property for a participation

in a pooled vehicle; or (ii) [t]he supervision of any person or persons so engaged" is an AP of a

retail forex CPO.

59. 7 U.S.C. § 6k(2) makes it unlawful for any person to be associated with a CPO as

an officer or agent (or any person occupying a similar status or performing similar functions), in

any capacity that involves the solicitation of funds, securities, or property for participation in a

commodity pool, unless such person is registered with the CFTC as an AP of a ceo. similarly,

7 U.S.C. § 2(c)(2)(C)(iii)(I)(cc) states that a person shall not operate or solicit funds for any

pooled investment vehicle in connection with forex transactions, unless registered pursuant to

CFTC regulations. 17 C.F.R. § 5.3(a)(2)(ii) (2022) requires those that meet the definition of an

AP of a retail forex CPO as defined by 17 C.F.R. § 5.1(d)(2) (2022) to register as such with the

CFTC. Steynberg acted as an AP of MTI throughout the Relevant Period by soliciting funds or

property (in the form of Bitcoin) for participation in the Pool. Accordingly, Steynberg violated 7

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 30 of 39

U.S.C. § 2(c)(2)(C)(iii)(I)(cc), 6k(2) and 17 C.F.R. § 5.3(a)(2)(ii) (2022) by, without being

registered with the CFTC, soliciting Bitcoin for participation in the Pool. Compl. ¶ 48; Malas

Dccl. III ¶J 7, 8, 26e; Malas Dccl. III Ex. 1 at MTI-NFA-2-1, 5-1 to 8-2 (NFA Certs.).

e. Steynberg Is Liable for MTI's Violations as a Controlling Person

60. From May 18, 2018 through at least March 2021, Steynberg was the owner, sole

officer, and President of MTI and has at all times controlled MTI. Compi. ¶IJ 33, 56, 67, 76, 87;

Malas Decl. III ¶J 7, 17, 21d; Malas Deci. III Ex. 3 at MTI-FSCA-31-58: 13-19 (FSCA Does.),

Ex. 5 at MTI-CFTC-WEB-3-6, 3-19 (MTI Website). To establish controlling person liability

under 7 U.S.C. § 13c(b), the CFTC must show that the person possesses the requisite degree of

control and either: (1) knowingly induced, directly or indirectly, the acts constituting the

violation; or (2) failed to act in good faith. CFTC v. Equity Fin. Grp. LLC, 572 F.3d 150, 160-61

(3d Cir. 2009) (finding individual defendants liable as controlling persons for corporation's

failure to register as commodity pooi operator).

61. To establish the first element, control, a defendant must possess general control

over the operation of the entity principally liable. See, e.g., R.J. Fitzgerald, 310 F.3d at 1334

(recognizing an individual who "exercised the ultimate choice-making power within the firm

regarding its business decisions" as a controlling person). Evidence that a defendant is the sole

principal, stockholder, member of the board of directors or the authorized signatory on the

company's bank accounts indicates the power to control a company. In re Spiegel, CFTC No.

85-19, 1988 WL 232212, at *8 (Jan. 12, 1988). The CFTC must also show that a defendant

possessed specific control, which is "the power or ability to control the specific transaction or

activity upon which the primary violation was predicated." Monieson v. CFTC, 996 F.2d 852,

860 (7th Cir. 1993) (internal quotation marks and citation omitted). The defendant does not need

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 31 of 39

to participate in or benefit from the wrongdoing; the issue is whether the defendant has the power

to address the illegal conduct. Id.

62. In addition to control, the CFTC must show the controlling person knowingly

induced, directly or indirectly, the acts constituting the violation, or did not act in good faith. To

show knowing inducement, the CFTC must show that a defendant had actual or constructive

knowledge of the core activities that constituted the violation of the Act or the Regulations, and

allowed the activities to continue. R.J. Fitzgerald, 310 F.3d at 1334; Spiegel, 1988 WL 232212,

at *7 To show lack of good faith, the CFTC must show that a defendant failed to maintain a

"reasonably adequate system of internal supervision and control" or did not oversee the system

"with any reasonable diligence." Monieson, 996 F.2d at 860.

63. As to Steynberg's general and specific control, he is the founder, CEO, and

shareholder of MTI and directed every aspect of the fraudulent scheme. Compl. ¶ 21; Malas

Decl. III ¶ 7. He directly made omissions and misrepresentations to participants and

misappropriated participants' funds and controlled the E-Wallets to which participants' Bitcoin

were sent. Compl. ¶11 6, 32, 33; Malas Deci. III ¶J 23-26, 30, 34, 41c; Malas Decl. III Ex. 3 at

MTI-FSCA-31-30, 36-1 to 36-4, 49-3, 78-1 to 78-3, 89-3, 89-15, 89-18, 94-27 (FSCA Docs.).

Thus, Steynberg had general control over MTI and specific control over the misconduct upon

which the primary violations are predicated. In addition, Steynberg knowingly induced the

violations because he individually had knowledge of the wrongdoing. See Spiegel, 1988 WL

232212, at *7 ("{W]e reject the view that a controlling person must know that the acts at issue

amount to a violation in order to be held to have 'knowingly' induced the acts constituting the

violation.... [I] f the controlling person knowingly induces acts that amount to a violation, he

will not escape liability merely because he acted in good faith."). Thus, Steynberg is liable as a

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 32 of 39

controlling person for MTI' s violations of the Act and Regulations described in this Motion.

III. RELIEF GRANTED

IT IS HEREBY ORDERED THAT:

A. Permanent Injunction

64. Based upon and in connection with the conduct described above, pursuant to 7

U.S.C. § 1 3a-1, Defendant is permanently restrained, enjoined and prohibited from directly or

indirectly:

a. Cheating or defrauding, or attempting to cheat or defraud, other persons; issuing

or causing to be issued false reports; willfully making or causing to be made to
other persons any false report or statement or willfully to enter or cause to be
entered for other persons any false record; and, willfully deceiving or attempting
to deceive other persons in or in connection with any order to make, or the
making of, any contract of sale of any commodity for future delivery, or forex
contract that is made, or to be made, for or on behalf of, or with, any other person
in violation of 7 U.S.C. § 6b(a)(2)(A)-(C) and 17 C.F.R. § 5.2(b)(1)-(3) (2022);

b. While acting as a CPO, using the mails or any means or instrumentalities of

interstate commerce, directly or indirectly to employ any device, scheme, or
artifice to defraud any participant or prospective participant, or to engage in any
transaction, practice, or course of business which operates as a fraud or deceit
upon any participant or prospective participant, in violation of 7 U.S.C.
§ 6o(l)(A)-(B);

c. Failing to operate a commodity pool as an entity cognizable as a legal entity

separate from that of the commodity pooi operator in violation of 17 C.F.R.
§ 4.20(a)(l) (2022);

d. Receiving funds from existing or prospective participants for the purchase of an

interest in a commodity pool without receiving the same in the commodity pool's
name in violation of 17 C.F.R. § 4.20(b) (2022);

e. Commingling the property of any commodity pool that he operates or that he

intends to operate with the property of any other person in violation of 17 C.F.R.
§ 4.20(c) (2022);

f. Acting as an associated person of a CPO without registering with the CFTC as an

AP of a CPU in violation of 7 U.S.C. § 2(c)(2)(C)(iii)(I)(cc), 6k(2), and 17
C.F.R. § 5.3(a)(2)(ii) (2022);

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 33 of 39

65. Defendant is also permanently restrained, enjoined and prohibited from directly or

indirectly:

a. Trading on or subject to the rules of any registered entity (as that term is defined
by 7 U.S.C. § la(40));

b. Entering into any transactions involving "commodity interests" (as that term is
defined in 17 C.F.R. § 1.3 (2022)), for Defendant's own personal accounts or for
any account in which he has a direct or indirect interest;

Having any commodity interests traded on his behalf;

d. Controlling or directing the trading for or on behalf of any other person or entity,
whether by power of attorney or otherwise, in any account involving commodity
interests;

e. Soliciting, receiving, or accepting any funds from any person for the purpose of
purchasing or selling of any commodity interests;

f. Applying for registration or claiming exemption from registration with the CFTC
in any capacity, and engaging in any activity requiring such registration or
exemption from registration with the CFTC except as provided for in Regulation
17 C.F.R. § 4.14(a)(9) (2022); and

g. Acting as a principal (as that term is defined in 17 C.F.R. § 3.1(a) (2022)), agent,
or any other officer or employee of any person (as that term is defined in 7 U.S.C.
§ 1 a(3 8)), registered, exempted from registration, or required to be registered with
the CFTC except as provided for in 17 C.F.R. § 4. 14(a)(9) (2022).

B. Restitution

66. 7 U.S.C. § 13a-l(d)(3)(A) authorizes the CFTC to seek, and the Court to order,

"restitution to persons who have sustained losses proximately caused by [a] violation [of the Act

or Regulations] (in the amount of such losses)." Restitution exists to restore the status quo and

make the injured party whole. Porter v. Warner Holding Co., 328 U.S. 395, 402 (1946)

(equitable restitution consists of "restoring the status quo and ordering the return of that which

rightfully belongs to the purchaser or tenant"). Accordingly, courts calculate restitution "as the

difference between what Defendants obtained and the amount customers have already received

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 34 of 39

back." CFTCv. Ross, No. l:09-cv-5443, 2014 WL 6704572, at *3 (N.D. Iii. Nov. 26, 2014); see

also CFTC v. Driver, 877 F. Supp. 2d 968, 981 (C.D. Cal. 2012) (finding that restitution exists to

"restore the status quo" and reflects "the difference between what defendants obtained and the

amount customers received back"). Where, as here, a defendant engages in systematic and

pervasive fraud, all funds obtained by the illegal enterprise may be included in the calculation of

restitution. See CFTC v. McDonnell, 332 F. Supp. 3d 641, 726-27 (E.D.N.Y. 2018) (holding that

in cases of pervasive fraud under the Act, the appropriate calculation of restitution includes all

customer losses even where only a subset of those customers testify to the losses they sustained

on the grounds that reliance on the defendant's fraud is presumed).

67. Steynberg's illegal conduct, as detailed herein, proximately caused participants to

incur net losses totaling not less than $1,733,838,372. Accordingly, Steynberg shall pay

restitution in the amount of $1,733,838,372.

68. If the Restitution Obligation is not paid immediately, post-judgment interest shall

accrue on the Restitution Obligations beginning on the date of entry of this Order and shall be

determined by using the Treasury Bill rate prevailing on the date of entry of this Order pursuant

to 28 U.S.C. § 1961.

69. To effect payment of the Restitution Obligation and the distribution of any

restitution payments to Defendants' participants, the Court appoints the National Futures

Association ("NFA") as Monitor ("Monitor"). The Monitor shall receive restitution payments

from Defendant and make distributions as set forth below. Because the Monitor is acting as an

officer of this court in performing these services, the NFA shall not be liable for any action or

inaction arising from the NFA's appointment as Monitor, other than actions involving fraud.

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 35 of 39

70. Defendants shall make Restitution Obligation payments, and any post-judgment

interest payments, under this Order to the Monitor in the name "Cornelius Steynberg Restitution

Fund" and shall send such payments by electronic funds transfer, or by U.S. postal money order,

certified check, bank cashier's check or bank money order, to the Office of Administration,

National Futures Association, 300 South Riverside Plaza, Suite 1800, Chicago, Illinois 60606

under cover letter that identifies the paying Defendant and the name and docket number of this

proceeding. The paying Defendant shall simultaneously transmit copies of the cover letter and

the form of payment to the Chief Financial Officer, Commodity Futures Trading Commission,

Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581.

71. The Monitor shall oversee the Restitution Obligations and shall have the

discretion to determine the manner of distribution of such funds in an equitable fashion to

Defendants' participants identified by the CFTC or may defer distribution until such time as the

Monitor deems appropriate.

72. Defendant shall cooperate with the Monitor as appropriate to provide such

information as the Monitor deems necessary and appropriate to identify Defendants' participants

to whom the Monitor, in its sole discretion, may determine to include in any plan for distribution

of any Restitution Obligation payments. Defendant shall execute any documents necessary to

release funds that they have in any repository, bank, investment or other financial institution,

wherever located, in order to make partial or total payment toward the Restitution Obligation.

73. The Monitor shall provide the CFTC at the beginning of each calendar year with a

report detailing the disbursement of funds to Defendants' clients during the previous year. The

Monitor shall transmit this report under a cover letter that identifies the name and docket number

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 36 of 39

of this proceeding to the Chief Financial Officer, Commodity Futures Trading Commission,

Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581.

74. The amounts payable to each participant shall not limit the ability of any client

from proving that a greater amount is owed from Defendants or any other person or entity, and

nothing herein shall be construed in any way to limit or abridge the rights of any client exist

under state or common law.

75. Pursuant to Rule 71 of the Federal Rules of Civil Procedure, each participant of

Defendants who suffered a loss is explicitly made an intended third-party beneficiary of this

Order and may seek to enforce obedience of this Order to obtain satisfaction of any portion of

the restitution that has not been paid by Defendant to ensure continued compliance with any

provision of this Order and to hold Defendant in contempt for any violations of any provision of

this Order.

76. To the extent that any funds accrue to the U.S. Treasury for satisfaction of

Defendant's Restitution Obligation, such funds shall be transferred to the Monitor for

disbursement in accordance with the procedures set forth above.

C. Civil Monetary Penalty

77. 7 U.S.C. § 13a-1(d)(1)(A) authorizes the imposition of a civil monetary penalty

("CMP") equal to the higher of triple a defendant's monetary gain from each violation of the

Act, or $214,514 per violation.4 "The court should consider a variety of factors in assessing a

CMP, and has broad discretion in fashioning an appropriate remedy that is 'rationally related to

the offense charged or the need for deterrence." CFTC v. Yorkshire Grp., Inc., No. 1:13 -cv-

'Pursuant to the associated regulation, 17 C.F.R. § 143.8(b)(l) (2022), the allowable inflation-
adjusted civil monetary penalty is $214,514 per violation of the Act (effective Jan. 15, 2023) for
non-manipulation claims brought in federal injunctive actions under 7 U.S.C. § 1 3a- 1.
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 37 of 39

5323, 2016 WL 8256380, at *6 (E.D.N.Y. Aug. 19, 2016) (quoting CFTC v. Levy, 541 F.3d

1102, 1112 (llthCir. 2008)).

78. Courts consider numerous factors in determining an appropriate CMP under the

Act, including "(1) whether Defendants' illegal acts violated core provisions of the Act; (2)

whether Defendants acted with scienter; (3) the consequences resulting from Defendants'

violations; (4) the financial benefits to Defendants; and (5) the harm to Defendants' customers."

CFTCv. Cfuentes, No. 2:16-cv-6167, 2018 WL 1904196, at *11 (D.N.J. Apr. 20, 2018). Courts

routinely award significant CMPs in cases involving fraud. See, e.g., CFTC v. Wright, No. 1:17-

cv-4722, 2018 WL 6437055, at *5 (S.D.N.Y. Dec. 7, 2018) (entering default judgment and

ordering a CMP of "treble damages" where defendant "intentionally implemented over a period

of years an extensive artifice to obtain clients' money and divert those funds to personal and

other unauthorized purposes instead of investing these funds").

79. Acting intentionally, Steynberg committed repeated violations of the core

antifraud provisions of the Act that caused significant monetary losses to participants. The

multi-year scheme included misrepresentations and omissions, the fabrication and issuance of

fraudulent account statements showing fictional trades, and misappropriation of participants'

funds for unauthorized purposes.

80. Given this conduct, Steynberg shall pay a civil monetary penalty in the amount of

$1,733,838,372 ("CMP Obligation"), which is equal to one time the funds Defendants

fraudulently solicited and obtained.

81. Defendant shall pay his CMP Obligation and any post-judgment interest, by

electronic funds transfer, U.S. postal money order, certified check, bank cashier's check, or bank

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 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 38 of 39

money order. If payment is to be made other than by electronic funds transfer, then the payment

shall be made payable to the CFTC and sent to the address below:

MMAC/ESC/AMK326
Commodity Futures Trading Commission
6500 S. MacArthur Blvd.
HQ Room 266
Oklahoma City, OK 73169
9-amc-ar-cftc@faa.gov

If payment by electronic funds transfer is chosen, Defendant shall contact Tonia King or her

successor at the address above to receive payment instructions and shall fully comply with those

instructions. Defendant shall accompany payment of the CMP Obligation with a cover letter that

identifies Defendant and the name and docket number of this proceeding. Defendant shall

simultaneously transmit copies of the cover letter and the form of payment to the Chief Financial

Officer, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street,

N.W., Washington, D.C. 20581.

D. Miscellaneous Provisions

82. Partial Satisfaction: Acceptance by the CFTC of any partial payment of

Defendant's CMP Obligation shall not be deemed a waiver of his obligation to make further

payments pursuant to this Order or a waiver of the CFTC '5 right to seek to compel payment of

any remaining balance.

83. Notice: All notices required to be given by any provision in this Order

shall be sent certified mail, return receipt requested, as follows:

Notice to Commission:
Ian McGinley
Director, Division of Enforcement
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581
 Case 1:22-cv-00635-DAE Document 27 Filed 04/24/23 Page 39 of 39

All such notices to the CFTC shall reference the name and docket number of this action.

84. Invalidation: If any provision of this Order or if the application of any provision

or circumstance is held invalid, then the remainder of this Order and the application of the

provision to any other person or circumstance shall not be affected by the holding.

85. Continuing Jurisdiction of this Court: This Court shall retain jurisdiction of this

action to ensure compliance with this Order and for all other purposes related to this action,

including any motion by Defendant to modify or for relief from the terms of this Order.

86. Injunctive and Equitable Relief Provisions: The injunctive and equitable relief

provisions of this Order shall be binding upon Defendant, upon any person under his authority or

control, and upon any person who receives actual notice of this Order, by personal service, e-

mail, facsimile or otherwise insofar as he or she is acting in active concert or participation with

Defendant.

THERE BEING NO JUST REASON FOR DELAY, the Clerk of the Court is hereby

ordered to enter this Order for Final Judgment by Default, Permanent Injunction, Civil Monetary

Penalty, and Other Statutory and Equitable Relief Against Defendant Steynberg forthwith and

without further notice.

IT IS SO ORDERED, at Austin, Texas on thisZ4' day 2023.

ST

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