In a ruling against a fraudulent cryptocurrency scheme, U.S. District Judge Mary Rowland ordered Sam Ikkurty and his company, Jafia, LLC, to pay over $120 million in fines and restitution.
The Northern District of Illinois issued this ruling on Monday which backs the charges initiated by the U.S. Commodity Futures Trading Commission (CFTC) in 2022.
According to CFTC’s post, Ikkurty misled investors with “material misrepresentations,” raising at least $44 million from approximately 170 individuals, assuring that they could receive an annual interest rate of 15% if they invested in Bitcoin or Ethereum.
However, court documents reveal that Ikkurty’s fund went through a massive loss in value of about 98.99% within a short period.
Based on the CFTC’s investigation, it was discovered that there was a “Ponzi-like” scheme where new investor funds were used to pay earlier participants. Ikkurty is claimed to have deceived prospective investors during webinars and trade shows by lying about his investment achievements and his experience with digital assets.
One highly reprehensible aspect of the fraud involved a carbon offset program whereby Ikkurty raised funds by selling products purportedly backed by carbon offset-related digital assets.
Instead of securing the promised collateral, he diverted over $20 million to cover the losses in other investments, leaving new investors with a significant shortfall.
The court also ruled that Ikkurty and Jafia, LLC failed to register as commodity pool operators with the CFTC, which was a required regulatory step for their activities.
In a noteworthy development, Judge Rowland’s order classified the cryptocurrencies OHM and Klima as commodities, potentially expanding the CFTC’s jurisdiction.
However, legal experts, including James Brady, a partner at Katten Muchin Rosenman LLP, caution that this classification may not preclude future determinations of these assets as securities by other regulatory bodies.
The CFTC warns that despite the restitution order, full recovery of investor funds may not be possible due to the potential insufficiency of the defendants’ assets.
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