An Illinois district court judge has ruled in favor of the United States Commodity Futures Trading Commission (CFTC) in a crypto Ponzi scheme case, declaring two lesser-known altcoins as commodities.
The scheme involved Sam Ikkurty from Oregon and several of his companies.
Ikkurty defrauded victims by promising “steady returns” of 15% per year from investments in “digital asset commodities,” which included Bitcoin, Ether, Olympus (OHM), and KlimaDAO (KLIMA). The court’s order stated that OHM and KLIMA are also qualified as commodities.
“Those virtual currencies fall into the same general class as Bitcoin, on which there is regulated futures trading,” said the CFTC.
KLIMA is the governance token of KlimaDAO, a decentralized autonomous organization focused on solving “coordination” problems in climate finance. At the time of publication,
KLIMA is trading at $3.55, a sharp decline from its all-time high of $3,777 on October 21, 2021, according to CoinGecko data.
OHM is the governance token of OlympusDAO, an organization aimed at creating a community-owned decentralized reserve currency.
In a July 3 statement, the CFTC explained that Ikkurty assured prospective participants that he invested only in stable crypto assets, using embellished stories of prior successes to gain investors’ trust.
Instead of returning profits, Ikkurty “ran something like a Ponzi scheme,” repeatedly misrepresenting the fund’s performance and failing to disclose that its value had plummeted by over 98.99% in a few months.
The court order revealed that Ikkurty transferred much of the funds to early investors to prevent them from incurring losses, resulting in a $20 million shortfall for investors in the purported carbon offset program.
Additionally, the CFTC noted that Ikkurty had previously lost his entire personal Bitcoin holdings to a hack.
Judge Mary Rowland ordered Ikkurty to pay over $83.7 million in restitution and $36.9 million in disgorgement.
The CFTC initially accused Ikkurty and Ravishankar Avadhanam of fraud and failing to register with the agency in May 2022.
The CFTC stated that the pair used a website, YouTube videos, and other means to solicit more than $44 million from at least 170 people to trade cryptocurrencies, derivatives, and commodity futures contracts.
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