Jul 05, 2024 12:25
A federaljudge has ordered an Oregon man and his companies to pay over $83 million inrestitution to victims of a fraudulent digital asset investment scheme thatoperated as "a classic Ponzi scheme," according to court documents.
Court Orders $83 Millionin Restitution for Digital Asset Fraud Scheme
Judge MaryRowland of the US District Court for the Northern District of Illinois granted summary judgmentto the Commodity Futures Trading Commission (CFTC) against Sam Ikkurty andseveral of his companies, including Jafia LLC and Ikkurty Capital LLC. Thecourt found the defendants violated the law through fraud and failure toregister as commodity pool operators.
Accordingto the court's findings, Ikkurty recruited investors by promising 15% annualreturns from investments in digital assets like Bitcoin and Ethereum. However,the judge determined Ikkurty made numerous false statements about hisinvestment experience and fund performance while operating "something akinto a Ponzi scheme."
"Ikkurty'smarketing materials misstated his fund's historical performance and omitted thefact that the fund fell in value by 98.99% over a period of a few months,"the CFTC commented in the official statement.
The orderrequires the defendants to pay $83.7 million in restitution and $36.9 millionin disgorgement. The CFTC plans to seek additional injunctive relief and civilmonetary penalties.
Federal court enters summary judgment against Oregon man and orders $83 million in restitution for fraud victims. The judgment is CFTCs first addressing fraud related to a carbon offset program. Learn more: https://t.co/lK6U7gKIfL
CFTC (@CFTC)
July 3, 2024A Classic Ponzi move
The courtalso found the defendants misappropriated over $20 million through a fraudulentcarbon offset program. Investors were sold products supposedly backed by carbonoffset-related digital assets, but the funds were instead used to pay earlierinvestors.
"Thisresulted in a shortfall of more than $20 million for the carbon offset programparticipants," the order states. "This series of events was a classicPonzi move."
In additionto fraud charges, the defendants were found to have failed to register with theCFTC as required. The order also affirmed the CFTC's jurisdiction over certainnon-Bitcoin cryptocurrencies, stating that OHM and Klima "qualify ascommodities" similar to Bitcoin.
CFTCofficials cautioned that the restitution order may not guarantee recovery oflost funds if the defendants lack sufficient assets.
Crypto Frequently Targetedby the CFTC
Cryptocurrenciesand associated Ponzi schemes frequently come under the scrutiny of the USregulator. In mid-May, the CFTC settled a case with FalconX, a crypto primebrokerage firm that was fined $1.8 million for failing to register as a futurescommission merchant (FCM). Additionally, the firm was ordered to cease anddesist from providing services to U.S. residents.
Meanwhile,the market watchdog has issued a stern warning to students and young jobseekers about the risks of becoming an unwitting "money mule" inschemes involving cryptocurrencies.
In March, USfederal prosecutors charged the cryptocurrency exchange KuCoin and two of itsfounders for allegedly breaching anti-money laundering (AML) laws. The chargesclaim that KuCoin operated in the U.S. without the necessary registration andlacked an adequate AML program.
The CFTCalso shows significant interest in pyramid schemes in the Forex market. InApril, a US federal court required a Californian individual and his company topay $9 million in a forex fraud case. This ruling granted the commoditiesregulator a significant win, with Eshaq Nawabi and his company, HyperionConsulting Inc., ordered to pay restitution and penalties.
This article was written by Damian Chmiel at www.financemagnates.com.
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