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.
