CFTC charges 2 men operating $44M digital currency Ponzi scheme

The United States Commodity Futures Trading Commission (CFTC) has charged two U.S. residents and their companies for operating a digital currency investment scheme that defrauded at least 170 investors.

In an official press release, the CFTC named the defendants to be Sam Ikkurty aka Sreenivas I Rao (Ikkurty) of Portland, Oregon; Ravishankar Avadhanam of Aurora, Illinois; and Jafia LLC, a company Ikkurty owns in Florida.

The CFTC complaint alleges that the two solicited more than $44 million from their victims starting in January 2021. They claimed that they would use investors’ funds to purchase, hold and trade digital assets, commodities, derivatives, swaps, and commodity futures contracts, using a website, YouTube videos, and other means to lure participants.

In reality, the two were running a Ponzi scheme where they misappropriated the pooled funds. Some of the funds were transferred to accounts and entities owned by the two, and also an offshore entity that may have converted some of it to digital currency.

“The complaint further alleges that instead of investing the pooled participant funds as represented, the defendants misappropriated participant funds by distributing them to other participants, in a manner akin to a Ponzi scheme,” the press release stated.

The CFTC is also charging the two for “operating an illegal commodity pool and failing to register as a Commodity Pool Operator.” Three funds owned by the two and operated by them are also named in the charge.

The case so far

So far in the case, the U.S. District Court Judge Hon. Mary Rowland has signed an ex parte statutory restraining order to freeze the assets of the two. The CFTC says it is seeking to compensate the defrauded investors.

The defendants will also likely get “civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”

In a similar case handled by the DOJ that CoinGeek reported, the defendant was sentenced to three years in prison for misappropriating $5 million in a digital currency scam.

The CFTC recently doubled down on its commitment to increase enforcement of digital currency-related enforcement actions. CFTC chair, Rostin Behnam, said the body is looking to follow in the steps of the SEC to increase its digital currency enforcement unit’s headcount, as reported by the Wall Street Journal (WSJ).

Meanwhile, the SEC has appointed about 30 new staff members for its Crypto Assets and Cyber Unit. In statements before Congress last week, SEC chair Gary Gensler cited the unit’s importance as one reason for the proposed increase in the commission’s budget.

Watch: CoinGeek New York panel, Investigating Criminal Activity on the Blockchain