Regulation
Judge fines Oregon man $120 million in cryptocurrency fraud case
In a ruling against a fraudulent cryptocurrency scheme, U.S. District Judge Mary Rowland ordered Sam Ikkurty and his company, Jafia, LLC, to pay more than $120 million in fines and restitution.
The Northern District of Illinois issued the decision Monday, which upholds charges brought by the U.S. Commodity Futures Trading Commission (CFTC) in 2022.
According to CFTC PublicationIkkurty deceived investors with “material misrepresentations,” collecting at least $44 million from approximately 170 individuals, assuring them that they could receive a 15% annual interest rate if they invested in Bitcoin or Ethereum.
However, court documents reveal that Ikkurty’s fund suffered a massive loss in value of around 98.99% over a short period of time.
The CFTC investigation revealed the existence of a Ponzi-type scheme, in which funds from new investors were used to pay previous participants. Ikkurty allegedly deceived potential investors at webinars and trade shows by lying about his investment achievements and experience with digital assets.
A highly reprehensible aspect of the fraud involved a carbon offset scheme in which Ikkurty raised funds by selling products purportedly backed by digital assets tied to the carbon offset.
Instead of providing the promised guarantees, he diverted more than $20 million to cover losses on other investments, leaving new investors with a significant shortfall.
The court also found that Ikkurty and Jafia, LLC failed to register as commodity pool operators with the CFTC, which was a required regulatory step for their operations.
In a notable development, Judge Rowland’s order classified the OHM and Klima cryptocurrencies 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 does not preclude future determinations of these assets as securities by other regulators.
The CFTC warns that despite the restitution order, full recovery of investors’ funds may not be possible due to the potential insufficiency of the defendants’ assets.
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