CFTC snuffs out crypto ponzi scheme that made away with $44M

• The CFTC has burst a crypto-related Ponzi scheme that defrauded over 170 investors of more than $44 million.
• In a court filing, the regulator now seeks restitution of the scheme’s victims, among other civil monetary penalties.

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In line with its commitment to protecting cryptocurrency investors, the Commodity Futures Trading Commission, CFTC, has cracked down on a crypto-related Ponzi scheme.

According to a Friday announcement from the regulator, the fraudulent scheme involved two individuals namely, Sam Ikkurty and Ravishankar Avadhanam. The conspiracy also involved the defendants’ entities: the Ikkurty-owned Jafia LLC, Ikkurty Capital (a.k.a. Rose City Income Fund), Rose City Income Fund II LP, and Seneca Ventures.

According to the CFTC’s filed enforcement action, the above-named defendants fraudulently solicited over $44 million from at least 170 investors. The defendants lured them with fake promises of income resulting from investments in various instruments. The list includes crypto, derivatives, swaps, commodities, commodity futures, and contracts.

The regulator also charges the respondents with illegal operation of a commodity pool, since it was not registered with the CFTC. Moreover, the respondents had no legitimate interest in the aforementioned funds, their primary intention being to swindle.

CFTC seeks justice for victims of crypto Ponzi scheme

The defendants have been running the crypto Ponzi scheme since at least January 2021, the CFTC complaint reads. Additionally, they ran the scheme through several channels, among them a website, and YouTube advertisements. Old investors were “paid” using new investments from newly recruited and unknowing investors.

Even more, the CFTC claims the defendants wired “millions of dollars” to an offshore firm, and thereafter, a foreign crypto exchange. There was also no evidence that the defendants put these funds back into the pool.

The CFTC now seeks for the US court to impose several civil monetary penalties on the defendants. Among them are restitution for the defrauded investors, disgorgement of ill-acquired gains, and permanent injunctions. Additional penalties that the regulator recommends are for the defendants to be permanently banned from registering any entities or trading any instruments. 

So far, the court has ordered the freezing of the defendants’ assets, alongside record preservation. It has also appointed a temporary receiver for any other investor funds that may flow in.

In pursuit of crypto Ponzi schemes

In April, US Securities and Exchange Commission (SEC) boss Gary Gensler revealed that his agency and the CFTC would work jointly to regulate cryptocurrencies. Previously, the two agencies were in a tug of war over who should cover the said role.

The Ikkurt filing is the latest in a string of enforcement actions that the CFTC has taken against crypto-related Ponzi scheme perpetrators. The regulator made a similar filing in early March against four defendants for a $44 million Bitcoin Ponzi scheme. The CFTC made yet another filing mid-month: a $59 million fraud scheme involving cryptocurrencies.