CFTC Announces Court Order for Ponzi Scheme Operators to Pay $83 Million in Restitution to Fraud Victims

The U.S. Commodity Futures Trading Commission (CFTC) announced on Wednesday that Judge Mary Rowland of the U.S. District Court for the Northern District of Illinois entered summary judgment on all counts of CFTC's complaint, ordering Sam Ikkurty of Oregon and Jafia, LLC, Ikkurty Capital, LLC d/b/a Rose City Income Fund I, Rose City Income Fund II, and Seneca Ventures, LLC (defendants) jointly and severally over $83.7 million in restitution and $36.9 million in disgorgement.

The order finds that Ikkurty and the defendants violated the Commodity Exchange Act (CEA) and CFTC regulations, including fraud and failure to register with the CFTC as commodity pool operators. Judge Rowland also found that the defendants operated as “a classic Ponzi scheme,” including in connection with the defendants' carbon offset scheme. The CFTC will seek injunctive relief and a civil monetary penalty. 

The summary judgment order finds Ikkurty recruited participants to his funds through webinars and trade shows by promising participants they would earn a steady distribution of 15% income per year of supposed “net profits” through investments in digital asset commodities such as Bitcoin and Ethereum, and commodity interests. Ikkurty touted the purported success of his prior fund to lure new participants into investing. Ikkurty assured prospective participants he invested in “stable” digital assets. Ikkurty also gained participants’ confidence by repeatedly telling stories of his personal success investing in and trading digital assets. 

Few of Ikkurty’s statements were true. In reality, per the summary judgment order, Ikkurty did not return any net profits to participants, and instead “ran something akin to a Ponzi scheme.” Citing the CFTC investigator’s testimony, Judge Rowland found Ikkurty’s marketing materials misstated his fund’s historical performance and omitted the fact that the fund fell in value by 98.99% over a period of a few months. Also, the order finds Ikkurty invested in unstable digital asset commodities, some related to carbon offsets, and his actual experience with digital assets consisted of losing his personal Bitcoins to a hack.

Notably, in addition to the misrepresentations, the summary judgment order also finds the defendants misappropriated funds through a carbon offset program. The defendants raised funds by selling products that were purportedly backed by digital assets related to carbon offsets. But instead of actually obtaining the promised collateral, the defendants transferred much of the funds to earlier investors in their other fund to allow them to avoid losses. According to the order, this resulted in a more than $20 million shortfall for the carbon offset program participants.