Altcoins
District Court Judge Sides With CFTC, Classifies Two Altcoins As Commodities In Crypto Fraud Case
An Illinois district court judge has ruled that two relatively obscure altcoins, OHM and KLIMA, should be classified as commodities.
The ruling is part of a larger case involving a $120 million crypto Ponzi scheme orchestrated by Oregon’s Sam Ikkurty and other affiliates.
Ikkurty’s Ponzi Scheme in Detail
Ikkurty’s project promised investors a stable annual return of 15% through investments in various crypto assets. Among the crypto instruments concerned are Bitcoin, Ether, the unpopular KlimaDAO (KLIMA) and Olympus (OHM).
The U.S. Commodity Futures Trading Commission (CFTC) has taken the case to court, arguing that digital assets fall under the same regulation as Bitcoin and are subject to futures trading regulations.
KlimaDAO works primarily as a decentralized autonomous organization (DAO) which aims to solve coordination problems in climate finance. The KLIMA coin is the governance token of the DAO.
Despite reaching an all-time high of $3,777 on October 21, 2021, KLIMA’s value has plummeted to just $3.55marking a 99.9% drop from its peak.
On the other hand, OlympusDAO is working to create a decentralized reserve currency with its governance token, OHM. Both tokens were relatively obscure before being thrust into the spotlight in this court case.
In a statement released on July 3, the CFTC revealed Ikkurty misled potential investors by claiming to invest only in stable crypto assets. He also exaggerated his past successes to build trust and attract investments.
Contrary to what he claims, Ikkurty set up a classic Ponzi pyramid, constantly misrepresenting the performance of his funds. In a few months, these same funds had already lost more than 98.99% of their value.
Crypto Ponzi Scheme Decision
To cover up the fund’s poor performance, Ikkurty redirected a substantial portion of investments to early investors. This decision resulted in a $20 million loss for investors in the so-called carbon offset program.
In addition to running a Ponzi scheme, Ikkurty had previously faced a hacking incident that left him deprived of all his personal Bitcoin holdings.
Judge Mary Rowland, ruling on the fraud case, ordered Ikkurty to pay more than $83.7 million in restitution and an additional $36.9 million in restitution.
Meanwhile, the CFTC had initially accused Ikkurty and his associate, Ravishankar Avadhanam, in May 2022. The charges included allegations of fraud and failure to register with the CFTC.
According to the CFTC, Ikkurty and Avadhanam raised more than $44 million from at least 170 investors using YouTube videos, a website and other promotional methods.
The duo told investors they would use the funds to trade derivatives, digital assets and commodity futures. The case highlights the ongoing regulatory scrutiny and legal challenges facing the cryptocurrency industry.
The Federal Trade Commission (FTC) revealed that more than 46,000 people reported losing more than $1 billion to various cryptocurrency-related scams between January 2021 and June 2022.
This staggering amount only reflects cases where victims came forward voluntarily to report their losses to authorities.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile and high-risk asset class.
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