The U.S. Commodity Futures Trading Commission (CFTC) has recovered $18 million in digital assets linked to a Ponzi scheme involving a purported “crypto hedge fund” run by Oregon resident Sam Ikkurty.
Ikkurty is accused of defrauding investors by promising “net profits” from a crypto fund without revealing that its performance had actually dropped by 98.99% within months, according to a CFTC release.
The agency discovered that Ikkurty invested in unstable digital assets, contrary to his claims, and that his supposed crypto expertise was baseless; his personal experience mainly involved losing Bitcoins in a hack.
U.S. District Judge Mary Rowland of the Northern District of Illinois ordered Ikkurty and other entities involved to pay a total of $209 million, including nearly $84 million in customer restitution, around $37 million in disgorgement of unlawful gains, and about $110 million as a civil monetary penalty. Additionally, Ikkurty was fined over $14 million for contempt.
“The defendants portrayed their programs as cutting-edge crypto and carbon investments when in reality they were plain, old-fashioned Ponzi schemes,” said CFTC Director of Enforcement Ian McGinley. “CFTC staff not only shut down the defendants’ fraudulent schemes and obtained a money judgment of over $200 million, but they also recovered more than $18 million in stolen digital assets that may otherwise have been lost forever.”
In a notable part of the order, Judge Rowland classified cryptocurrencies OHM and Klima as commodities, extending the CFTC’s jurisdiction. “The order finds not only are Bitcoin and Ethereum commodities within the CFTC’s jurisdiction, but also ‘OHM and Klima, two non-Bitcoin virtual currencies … qualify as commodities, noting those virtual currencies fall into the same general class as Bitcoin, on which there is regulated futures trading,” the CFTC said in a statement.
Both OHM and Klima are smaller cryptocurrencies compared to Bitcoin, Ether, or Dogecoin. The ongoing debate about which assets are securities (under the SEC’s jurisdiction) and which are commodities (under the CFTC’s jurisdiction) continues. While CFTC Chair Rostin Behnam has classified Ether as a commodity, SEC Chair Gary Gensler suggested most cryptocurrencies are securities and has been less clear on Ether’s classification.
The case stems from charges brought by the CFTC in 2022 against Ikkurty and Ravishankar Avadhanam for fraud and failure to register with the agency. Avadhanam’s case was dismissed in 2023 as part of an agreement with the CFTC.
According to the CFTC, Ikkurty and Avadhanam solicited $44 million from at least 170 investors through a website and YouTube videos, promising to hold and trade digital assets, derivatives, swaps, and futures contracts.
Jafia LLC developed a crypto savings note that promised buyers an 18% annual interest. Instead, Ikkurty invested the funds into cryptocurrencies like OHM and Klima and used funds raised for investments to pay off early investors in a classic Ponzi scheme move.
