According to a report by The Block, a U.S. district judge has sided with the Commodity Futures Trading Commission (CFTC) and ordered an Oregon man and his company to pay over $120 million to the victims of what the agency described as a Ponzi-like scheme, partly as restitution. Notably, the judge’s order also classified OHM and Klima as commodities.
In an opinion issued on Monday (1st), Judge Mary Rowland of the Northern District of Illinois stated that Sam Ikkurty of Oregon and his company, Jafia, LLC, made “materially false statements.” The CFTC, in a press release on Wednesday, indicated that Ikkurty and his company engaged in fraud and were not registered.
Judge Rowland also stated in her order that the cryptocurrencies OHM and Klima are commodities. The CFTC wrote in the press release:
Industry experts believe that the judge’s classification of OHM and Klima as commodities may not have a significant impact beyond establishing CFTC’s jurisdiction over the case. James Brady, a partner at the law firm Katten Muchin Rosenman LLP, commented in an interview, “I don’t think it’s a big deal; I think it’s more of a response to the defendants’ aggressive claim that the CFTC had no jurisdiction.”
Brady added that the Securities and Exchange Commission (SEC) could still potentially classify these tokens as securities.
The Ponzi Scheme Case
This case involves charges brought by the Commodity Futures Trading Commission (CFTC) in 2022 against Ikkurty and Ravishankar Avadhanam for fraud and failing to register with the agency. According to the order, as part of a settlement with the CFTC, Avadhanam’s case was dismissed in 2023.
The CFTC claimed the two carried out a scheme resembling a “Ponzi scheme,” raising approximately $44 million from at least 170 investors through a website and YouTube videos, then holding and trading digital assets, derivatives, swaps, and futures contracts.
Jafia LLC, the company involved, developed a crypto savings note that promised buyers an annual interest rate of 18%. According to the order, Ikkurty instead invested the funds from these notes into cryptocurrencies such as OHM and Klima and at one point used the purported investment funds to pay early investors in the scheme, which the order labeled as “a typical Ponzi scheme act.”
