A district court judge in Illinois has ruled in favor of the Commodity Futures Trading Commission (CFTC) in a case involving a cryptocurrency Ponzi scheme. The judge classified two lesser-known altcoins, Olympus (OHM) and KlimaDAO (KLIMA), as commodities.
The Ponzi scheme was orchestrated by a man named Sam Ikkurty from Oregon and his companies. The scheme defrauded victims by promising them steady returns of 15% per year from investments in digital asset commodities, which included Bitcoin (BTC) and Ether (ETH), as well as OHM and KLIMA.
The CFTC stated that these virtual currencies are in the same category as Bitcoin, which has regulated futures trading. KLIMA is the governance token of Klima DAO, a decentralized autonomous organization that focuses on solving coordination issues in climate finance.
KLIMA is currently trading at $3.55, a significant drop of 99.9% from its all-time high of $3,777 on October 21, 2021, according to CoinGecko. OHM, on the other hand, is the governance token of OlympusDAO, an organization that aims to create a community-owned decentralized reserve currency.
In a statement released on July 3, the CFTC revealed that Ikkurty misled potential investors by claiming that he only invested in stable crypto assets and exaggerated his past successes. However, instead of delivering profits, Ikkurty operated a Ponzi scheme and continuously misrepresented the performance of his fund. He intentionally failed to disclose that the value of his fund had dropped by over 98.99% in just a few months.
Furthermore, the court found that Ikkurty transferred a significant portion of the funds to early investors to prevent them from incurring losses. As a result, investors in the carbon offset program suffered a total loss of $20 million.
The CFTC also noted that Ikkurty had previously lost all of his personal Bitcoin holdings in a hack. Judge Rowland has ordered Ikkurty to pay over $83.7 million in restitution and $36.9 million in disgorgement.
The CFTC initially accused Ikkurty and Ravishankar Avadhanam of fraud and failure to register with their agency in May 2022. The pair allegedly used various methods, including a website and YouTube videos, to solicit over $44 million from at least 170 individuals for trading cryptocurrencies, derivatives, and commodity futures contracts.