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Two U.S. residents have been charged with running a crypto Ponzi scheme that allegedly defrauded hundreds of investors out of a collective $44 million.
Officials with the Commodity Futures Trading Commission (CFTC) allege Sam Ikkurty (also known as Sreenivas I Rao), of Portland, Ore., and Ravishankar Avadhanam of Aurora, Ill., as well as several corporate entities controlled by the defendants, worked together to convince their victims to invest in a “so-called income fund invested in digital assets.”
The defendants have also been charged with operating an illegal commodity pool and failing to register as a Commodity Pool Operator with the CFTC.
Beginning in 2017, Ikkurty and Avadhanam allegedly told would-be investors in Ikkurty Capital, Rose City Income Fund and Seneca Ventures that the pair would use their funds to invest in various cryptocurrencies, promising very high returns – some as high as 62% annually. According to the complaint, the pair advertised via a website as well as videos posted on YouTube.
Instead, the CFTC said, Ikkurty and Avadhanam pooled the investor funds and “distributed the majority of those funds as profits to other participants in a manner akin to a Ponzi scheme.”
Additionally, the CFTC said Ikkurty and Avadhanam kept $18 million for themselves, transferring the funds to “other participants” and off-shore entities under their control.
A federal court in Illinois has issued a restraining order that freezes the assets in question, preserves documents relating to the alleged scheme, and appoints a receiver for investor funds.
The CFTC is seeking restitution, disgorgement, civil monetary penalties, and permanent trading bans and injunctions against future violations of the Commodity Exchange Act (CEA).