U.S. District Judge Mary Rowland ordered Sam Ikkurty and his company Jafia, LLC to pay over $120 million in fines and restitution for their involvement in a fraudulent cryptocurrencycurrency scheme. This ruling from the Northern District of Illinois supports the charges initiated by the U.S. Commodity Futures Trading Commission (CFTC) in 2022.
The CFTC’s investigation revealed that Ikkurty misled investors with false promises. He raised at least $44 million from around 170 individuals by assuring them they could receive an annual interest rate of 15% if they invested in Bitcoin or Ethereum. However, court documents showed that Ikkurty’s fund lost about 98.99% of its value in a short period.
The investigation also uncovered a “Ponzi-like” scheme where new investor funds were used to pay earlier participants. Ikkurty deceived prospective investors during webinars and trade shows, lying about his investment successes and his experience with digital assets. This fraudulent activity misled many investors into trusting him with their money.
One particularly egregious part of the fraud involved a carbon offset program. Ikkurty raised funds by selling products supposedly backed by carbon offset-related digital assets. Instead of securing the promised collateral, he diverted over $20 million to cover losses in other investments, leaving new investors with significant losses.
The court also found that Ikkurty and Jafia, LLC failed to register as commodity pool operators with the CFTC, a required regulatory step for their activities. This failure added to the gravity of their fraudulent scheme and the severity of the penalties imposed by the court.
In a notable development, Judge Rowland’s order classified the cryptocurrencycurrencies OHM and Klima as commodities. This classification could potentially expand the CFTC’s jurisdiction. However, legal experts like James Brady, a partner at Katten Muchin Rosenman LLP, warn that this classification may not prevent other regulatory bodies from determining these assets as securities in the future.
Despite the restitution order, the CFTC cautions that full recovery of investor funds may not be possible. This is due to the potential insufficiency of the defendants’ assets, which may not cover the total amount of restitution ordered by the court. Investors are warned to manage their expectations regarding the recovery of their lost funds.
Also read: Montreal Woman Falls Victim to Fake Crypto Platform Scam
