Release Number 8532-22
CFTC Charges Oregon and Illinois Residents and Florida Company in $44 Million Misappropriation in Ongoing Digital Asset and Commodity Futures Fraud
Court Issues Restraining Order that Freezes Assets, Preserves Documents and Appoints Receiver
May 19, 2022
Washington, D.C. — The Commodity Futures Trading Commission announced today that it has filed a civil enforcement action in the U.S. District Court for the Northern District of Illinois, charging Sam Ikkurty a/k/a Sreenivas I Rao (Ikkurty) of Portland, Oregon, Ravishankar Avadhanam of Aurora, Illinois, and Jafia LLC, a company Ikkurty owns in Florida, with fraudulently soliciting at least $44 million for participation interests in a so-called income fund invested in digital assets and other instruments. The enforcement action also charges the defendants with operating an illegal commodity pool and failing to register as a Commodity Pool Operator.
In addition, the complaint charges three funds owned and operated by the defendants, Ikkurty Capital LLC d/b/a Rose City Income Fund, Rose City Income Fund II LP (Rose City) and Seneca Ventures LLC, as relief defendants in possession of funds to which they have no legitimate interest.
On May 11, 2022, U.S. District Court Judge Hon. Mary Rowland signed an ex parte statutory restraining order freezing assets controlled by the defendants, preserving records, and appointing a Temporary Receiver. The defendants were served with process on May 16, 2022, and a status hearing is scheduled for May 25, 2022.
In its continuing litigation, the CFTC seeks restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The complaint alleges that since at least January 2021, the defendants have used a website, YouTube videos, and other means to solicit more than $44 million from at least 170 participants to purchase, hold and trade digital assets, commodities, derivatives, swaps and commodity futures contracts. The complaint further alleges that instead of investing the pooled participant funds as represented, the defendants misappropriated participant funds by distributing them to other participants, in a manner akin to a Ponzi scheme. The complaint also alleges that the defendants transferred some participant funds to other accounts under their control and for their benefit. The defendants also transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.
The Division of Enforcement staff members responsible for this case are Candice Haan, Heather J. Dasso, Joseph Patrick, Venice Bickham, Stacie Pan, David Terrell, Scott Williamson and Robert Howell.
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The CFTC has issued several customer protection Fraud Advisories and Articles that provide the warning signs of fraud, including one to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.
The CFTC also strongly urges the public to verify a company’s registration with the Commission before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.