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05/07/24
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U.S. CFTC Called Crypto Involved in a Ponzi Scheme Commodities
On July 3, the United States Commodity Futures Trading Commission (CFTC) in a crypto Ponzi case published a press release noting that a district court in Illinois entered an order granting summary judgment to the commission on all counts of its complaint against an individual and certain firms for operating as “a classic Ponzi scheme,” involving crypto assets.
Sam Ikkurty used trade shows and webinars to recruit participants to his funds and promised them earnings of a steady distribution of 15 percent income each year of supposed net profits. He claimed that the profits were based on investments in digital asset commodities like BTC and ETH, as well as commodity interests. “Those virtual currencies fall into the same general class as Bitcoin, on which there is regulated futures trading,” said the CFTC.
“Ikkurty touted the purported success of his prior fund to lure new participants to invest. Ikkurty assured prospective participants he invested in “stable” digital assets. Ikkurty also gained participants’ confidence by repeatedly telling stories of his personal success investing in and trading digital assets,” reads the press release.
However, the participants did not receive any net profits while he continued to run it like a Ponzi scheme. The court discovered that his marketing materials included a misstatement of his fund’s historical performance and refused to highlight the fund’s 98.99 percent decline in value over a period of a few months.
Ikkurty and the firms misappropriated funds via a carbon offset program and obtained funds through the sale of products purportedly backed by digital assets associated with carbon offsets. They did not obtain the promised collateral, but instead transferred much of the funds to earlier investors in their other fund towards avoiding losses.
The court also asked them to pay over $83.7 million in restitution as well as $36.9 million in disgorgement jointly.
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