CFTC Charges Two People With Running $44mn Crypto Ponzi Scheme

The Commodity Futures Trading Commission (CFTC) has charged two U.S. residents with running a cryptocurrency investment scheme that defrauded over 170 investors, stating that the transactions were done in a manner akin to a "Ponzi scheme."

In an official statement released on May 19, the CFTC alleged that the defendants, Sam Ikkurty and Ravishankar Avadhanam, fraudulently solicited a total of $44 million from investors via several corporate entities under their control.

The watchdog also charged the defendants with operating an illegal commodity pool and failing to register as a Commodity Pool Operator with the CFTC.

Further, the complaint charged three funds owned and operated by the defendants, Ikkurty Capital LLC Rose City Income Fund, Rose City Income Fund II LP (Rose City) and Seneca Ventures LLC, as relief defendants in possession of funds to which they have no legitimate interest.

As per the statement, the duo started targeting investors in January 2021 through various channels such as an official website and a YouTube channel.

The regulator alleged that rather than making any investment with funds from investors, they “misappropriated participant funds by distributing them to other participants, in a manner akin to a Ponzi scheme.”

The Commission noted that Ikkurty and Avadhanam kept a portion of the funds for themselves and “other participants” and transferred the remaining to off-shore entities under their control.

“The defendants transferred some participant funds to other accounts under their control and for their benefit. The defendants also transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool,” the complaint stated.

A U.S. federal court has already issued an order to freeze the assets of the defendants, and instructions have been passed to preserve documents relating to the scheme and the appointment of a temporary recipient of investor funds.

The CFTC is now seeking restitution and disgorgement of ill-gotten gains.