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A federal
judge has ordered an Oregon man and his companies to pay over $83 million in
restitution to victims of a fraudulent digital asset investment scheme that
operated as “a classic Ponzi scheme,” according to court documents.
Court Orders $83 Million
in Restitution for Digital Asset Fraud Scheme
Judge Mary
Rowland of the US District Court for the Northern District of Illinois granted summary judgment
to the Commodity Futures Trading Commission (CFTC) against Sam Ikkurty and
several of his companies, including Jafia LLC and Ikkurty Capital LLC. The
court found the defendants violated the law through fraud and failure to
register as commodity pool operators.
According
to the court’s findings, Ikkurty recruited investors by promising 15% annual
returns from investments in digital assets like Bitcoin and Ethereum. However,
the judge determined Ikkurty made numerous false statements about his
investment experience and fund performance while operating “something akin
to a Ponzi scheme.”
“Ikkurty’s
marketing materials misstated his fund’s historical performance and omitted the
fact that the fund fell in value by 98.99% over a period of a few months,”
the CFTC commented in the official statement.
The order
requires the defendants to pay $83.7 million in restitution and $36.9 million
in disgorgement. The CFTC plans to seek additional injunctive relief and civil
monetary penalties.
Federal court enters summary judgment against Oregon man and orders $83 million in restitution for fraud victims. The judgment is CFTC’s first addressing fraud related to a carbon offset program. Learn more: https://t.co/lK6U7gKIfL
— CFTC (@CFTC) July 3, 2024
“A Classic Ponzi move”
The court
also found the defendants misappropriated over $20 million through a fraudulent
carbon offset program. Investors were sold products supposedly backed by carbon
offset-related digital assets, but the funds were instead used to pay earlier
investors.
“This
resulted in a shortfall of more than $20 million for the carbon offset program
participants,” the order states. “This series of events was a classic
Ponzi move.”
In addition
to fraud charges, the defendants were found to have failed to register with the
CFTC as required. The order also affirmed the CFTC’s jurisdiction over certain
non-Bitcoin cryptocurrencies, stating that OHM and Klima “qualify as
commodities” similar to Bitcoin.
CFTC
officials cautioned that the restitution order may not guarantee recovery of
lost funds if the defendants lack sufficient assets.
Crypto Frequently Targeted
by the CFTC
Cryptocurrencies
and associated Ponzi schemes frequently come under the scrutiny of the US
regulator. In mid-May, the CFTC settled a case with FalconX, a crypto prime
brokerage firm that was fined $1.8 million for failing to register as a futures
commission merchant (FCM). Additionally, the firm was ordered to cease and
desist from providing services to U.S. residents.
Meanwhile,
the market watchdog has issued a stern warning to students and young job
seekers about the risks of becoming an unwitting “money mule” in
schemes involving cryptocurrencies.
In March, US
federal prosecutors charged the cryptocurrency exchange KuCoin and two of its
founders for allegedly breaching anti-money laundering (AML) laws. The charges
claim that KuCoin operated in the U.S. without the necessary registration and
lacked an adequate AML program.
The CFTC
also shows significant interest in pyramid schemes in the Forex market. In
April, a US federal court required a Californian individual and his company to
pay $9 million in a forex fraud case. This ruling granted the commodities
regulator a significant win, with Eshaq Nawabi and his company, Hyperion
Consulting Inc., ordered to pay restitution and penalties.
This article was written by Damian Chmiel at www.financemagnates.com.
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