CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange
The CFTC alleged that defendants 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 Commodity Futures Trading Commission has charged Sam Ikkurty, Ravishankar Avadhanam, and wholly-owned Florida-based company Jafia LLC, with fraudulently soliciting at least $44 million for participation interests in a so-called income fund invested in digital assets and other instruments.
The civil enforcement action filed in the U.S. District Court for the Northern District of Illinois also charges the defendants with operating an illegal commodity pool and failing to register as a Commodity Pool Operator.
The three funds owned and operated by the defendants – Ikkurty Capital LLC d/b/a Rose City Income Fund, Rose City Income Fund II LP (Rose City) and Seneca Ventures LLC – were also charged as relief defendants in possession of funds to which they have no legitimate interest.
$44 million from at least 170 investors
According to the CFTC, since at least January 2021, the defendants have used a website, YouTube videos, and other means to solicit more than $44 million from at least 170 participants to purchase, hold and trade digital assets, commodities, derivatives, swaps and commodity futures contracts.
Instead of investing the pooled participant funds as represented, the defendants allegedly followed the typical Ponzi method of misappropriating participant funds by distributing them to other participants.
Sam Ikkurty and Ravishankar Avadhanam also transferred some participant funds to other accounts under their control and for their benefit, according to the complaint, which added that the defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange, as none of these funds were returned to the pool.
The court signed an ex parte statutory restraining order freezing assets controlled by the defendants, preserving records, and appointing a Temporary Receiver.
SEC charges $410m Ponzi scheme
Last week, Brian K. Martinsen, Michael A. Castillero, Francine A. Lanaia, and Eric D. Lachow were charged with fraud for allegedly running an unregistered broker-dealer with a vast network of sales agents, and raising at least $410 million from more than 2,200 investors from November 2017 through February 2022.
Investors were allegedly told that each investment would be kept separate and that they were not be charged upfront fees. Defendants, however, freely commingled investor funds, paid themselves more than $75 million, and paid their sales agents nearly $48 million from illegal, undisclosed markups on the pre-IPO shares that were, in some cases, as high as 100 percent, according to the securities regulator.
The financial watchdog also told the court there is a share deficit of at least $14 million across the funds and that two of the three founders, Castillero and Lanaia, ran the funds despite being barred from the brokerage industry.
“We allege that the defendants deceived investors about the pre-IPO shares they held, how much they were charging in fees, and who was controlling the business—all while paying themselves more than $75 million. We filed this emergency action to stop the ongoing fraud and to preserve assets for investors”, said Lara S. Mehraban, Acting Director of the New York Regional Office.
