CFTC Busts $44 Million Ponzi Crypto Investment Scheme
- The alleged perpetrators defrauded at least 170 investors.
- They have targeted investors at least since January 2021.
The Commodity Futures Trading Commission (CFTC) has busted another fraudulent digital asset investment scheme. The agency has filed an enforcement action against two individuals and their entities for fraudulently soliciting at least $44 million.
According to Friday’s announcement, the individuals are Sam Ikkurty, Ravishankar Avadhanam and Ikkurty-owned Jafia LLC. In addition,the complaint charged three funds owned and operated by the primary defendants: Ikkurty Capital (Rose City Income Fund), Rose City Income Fund II LP and Seneca Ventures.
The primary charges against the defendants were for soliciting investors with false promises of income funds invested in digital assets and other instruments. Moreover, they are charged for operating in an illegal commodity pool as they failed to register with the market regulator.
The name of the three funds came as the defendants were in possession of them without any legitimate interest in them.
A Large Scale Digital Operation
They solicited at least $44 million from around 170 investors with the promises of purchasing, holding and trading digital assets, commodities, derivatives, swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term and commodity futures contracts. They even ran a Ponzi-styled operation by misappropriating participants' funds for others, without making any pooled investment.
Further, the defendants allegedly transferred 'millions of dollars' to an offshore entity and then moved them to a foreign cryptocurrency exchange. Additionally, the complaint highlighted that none of these funds were returned to the pool.
The CFTC is now seeking restitution to the defrauded investors and disgorgement of ill-gotten gains. Furthermore, it wants civil monetary penalties and permanent trading and registration bans, along with permanent injunctions.
The US court already ordered that the assets of the defendants be frozen, along with instructions to preserve records and the appointment of a temporary receiver.
The Commodity Futures Trading Commission (CFTC) has busted another fraudulent digital asset investment scheme. The agency has filed an enforcement action against two individuals and their entities for fraudulently soliciting at least $44 million.
According to Friday’s announcement, the individuals are Sam Ikkurty, Ravishankar Avadhanam and Ikkurty-owned Jafia LLC. In addition,the complaint charged three funds owned and operated by the primary defendants: Ikkurty Capital (Rose City Income Fund), Rose City Income Fund II LP and Seneca Ventures.
The primary charges against the defendants were for soliciting investors with false promises of income funds invested in digital assets and other instruments. Moreover, they are charged for operating in an illegal commodity pool as they failed to register with the market regulator.
The name of the three funds came as the defendants were in possession of them without any legitimate interest in them.
A Large Scale Digital Operation
They solicited at least $44 million from around 170 investors with the promises of purchasing, holding and trading digital assets, commodities, derivatives, swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term and commodity futures contracts. They even ran a Ponzi-styled operation by misappropriating participants' funds for others, without making any pooled investment.
Further, the defendants allegedly transferred 'millions of dollars' to an offshore entity and then moved them to a foreign cryptocurrency exchange. Additionally, the complaint highlighted that none of these funds were returned to the pool.
The CFTC is now seeking restitution to the defrauded investors and disgorgement of ill-gotten gains. Furthermore, it wants civil monetary penalties and permanent trading and registration bans, along with permanent injunctions.
The US court already ordered that the assets of the defendants be frozen, along with instructions to preserve records and the appointment of a temporary receiver.