An Illinois district court judge has ruled in favor of the United States Commodity Futures Trading Commission (CFTC) in a case involving a cryptocurrency Ponzi scheme. The judge classified two lesser-known altcoins as commodities, aligning with the CFTC’s assertions.
The Ponzi operation, led by Sam Ikkurty of Oregon and his affiliated entities, deceived victims by promising consistent annual returns of 15% through investments in “digital asset commodities.” These assets encompassed well-known cryptocurrencies like Bitcoin (BTC) and Ether (ETH), alongside Olympus (OHM) and KlimaDAO (KLIMA), which the court also recognized as commodities.
“These virtual currencies are categorized similarly to Bitcoin, which is subject to regulated futures trading,” stated the CFTC.
KLIMA serves as the governance token for KlimaDAO, a decentralized autonomous organization focusing on addressing coordination challenges within climate finance initiatives. The price of KLIMA has drastically dropped, currently trading at $3.55 from its peak of $3,777 in October 2021, marking a decline of 99.9%, according to CoinGecko.
OHM, the governance token of OlympusDAO, supports the creation of a community-governed decentralized reserve currency.
In a statement on July 3, the CFTC highlighted Ikkurty’s misleading assurances to potential investors, falsely claiming investments in stable cryptocurrencies while embellishing past successes to gain trust. Contrary to promises, Ikkurty operated a Ponzi-like scheme, repeatedly distorting fund performance data and withholding information about a significant drop in fund value by over 98.99% within a few months.
Moreover, the court’s findings revealed that Ikkurty redirected substantial funds to early investors to prevent them from incurring losses, resulting in a $20 million deficit in the purported carbon offset program.
The CFTC also noted Ikkurty’s prior loss of his entire personal Bitcoin holdings due to a hack. Judge Mary Rowland subsequently mandated restitution of over $83.7 million and disgorgement of $36.9 million from Ikkurty.
Earlier in May 2022, the CFTC had accused Ikkurty and Ravishankar Avadhanam of fraud and failing to register with the agency. The pair utilized websites, YouTube videos, and other methods to solicit over $44 million from at least 170 individuals for trading cryptocurrencies, derivatives, and commodity futures contracts.