Two U.S. nationals have been charged with running a crypto Ponzi scheme that allegedly defrauded hundreds of investors out of a total of $44 million.
Commodity Futures Trading Commission (CFTC) officials accuse Sam Ikkurty (also known as Sreenivas I Rao) of Portland, Oregon, and Ravishankar Avadhanam of Aurora, Illinois, as well as several companies controlled by the defendants, of convincing their victims to invest in a "so-called income fund that invests in digital assets."
The defendants were also charged with operating an illegal commodity pool and failing to register as commodity pool operators with the CFTC.
Beginning in 2017, Ikkurty and Avadhanam allegedly told potential investors in Ikkurty Capital, Rose City Income Fund, and Seneca Ventures that the two would use their funds to invest in various cryptocurrencies, promising very high returns - up to 62% annually in some cases. According to the complaint, the two advertised through a website as well as videos on YouTube.
Instead, the CFTC said, Ikkurty and Avadhanam pooled investor funds and "distributed the majority of those funds as profits to other participants in a manner similar to a Ponzi scheme."
In addition, the CFTC said, Ikkurty and Avadhanam kept $18 million for themselves and transferred the funds to "other participants" and offshore entities under their control.
A federal court issued a temporary restraining order freezing the assets in question, preserving documents related to the alleged fraud, and appointing a receiver for the investor funds.
The CFTC is seeking restitution, restitution, civil monetary penalties, and a permanent trading ban and injunction against future Commodity Exchange Act (CEA) violations.