An Illinois district judge sided with the U.S. Commodity Futures Trading Commission and ordered an Oregon resident and his company to pay more than $120 million to victims, some of which must go toward restitution, in what the agency called a “Ponzi-like” scam.
Oregon state Sam Ikkurty and his company Jafia, LLC made “material misrepresentations.” Judge Mary Rolland of the Northern District of Illinois said in an opinion released Monday but posted by the CFTC on Wednesday that Ikurti and his company committed fraud without registering.
It is noteworthy that Judge Rowland stated in his order that cryptocurrencies OHM and Klima are also commodities.
“The order notes that not only are Bitcoin and Ethereum commodities within the CFTC’s jurisdiction, but that two non-Bitcoin virtual currencies, OHM and Klima, also qualify as commodities and fall into the same general category as Bitcoin for which there are regulated futures transactions,” the CFTC said. name.
The CFTC did not respond to a request for comment.
OHM and Klima are both small cryptocurrencies compared to Bitcoin, Ether or Dogecoin. However, the determination of whether assets under the jurisdiction of the U.S. Securities and Exchange Commission are securities or commodities under the CFTC has been a constant debate. CFTC Chairman Rostin Behnam has stated, for example, that Ether is a commodity, SEC Chairman Gary Gensler has said most cryptocurrencies are securities, and was less straightforward about ether’s classification.
Judge Rowland’s decision to deem OHM and Clima as commodities may mean little more than that the CFTC has established jurisdiction over the case.
“I don’t think it’s a big deal,” James Brady, a partner at Katten Muchin Rosenman LLP, said in an interview. “I believe this is in response to the defendant’s aggressive assertion that the CFTC has no jurisdiction.”
Brady added that the SEC may later consider both to be securities.
This incident includes: fee CFTC’s 2022 lawsuit against Ikkurty Ravishankar Avadanam was charged with fraud and failure to register as an entity. According to the order, Avadanam’s case was dismissed in 2023 as part of a settlement with the CFTC.
The CFTC said the pair ran a “Ponzi”-like scam that raised about $44 million from at least 170 investors through websites and YouTube videos. They then held and traded digital assets, derivatives, swaps and futures contracts.
Jafia LLC developed a cryptocurrency savings check that advertised an annual interest rate of 18% to buyers. Instead, Ikkurty invested the checks in cryptocurrencies such as OHM and Klima, according to the order, and at some point used the funds raised for investment purposes to pay the initial investors in the scheme, in what the order calls a “classic Ponzi scheme.”
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