CFTC charges Ohio Man for running a $12M BTC Ponzi scheme

An Ohio resident who ran a $12 million Ponzi scheme involving bitcoin has been fined by the US Commodities Futures and Trading Commission (CFTC). According to a complaint filed by the CFTC at a district court in the state on Thursday, the man ran the fraud to pay for his expensive lifestyle.

A Ponzi scheme is a fraudulent investment practice in which initial investors are compensated with money derived from later ones. The CFTC announced on Friday that Rathnakishore Giri, of New Albany, Ohio, had posed as a successful cryptocurrency trader.

He then apparently convinced over 150 would-be investors to give him $12 million in cash, plus at least 10 Bitcoins worth about $240,326 today.

CFTC presses Ponzi scheme charges against an Ohio resident

The complaint, filed in the Southern District of Ohio, targets one Rathnakishore Giri and his two firms: SR Private Equity LLC and NBD Eidetic Capital LLC. The CFTC also wants Giri to reimburse his investors for their losses.

According to CFTC Commissioner Kristin N. Johnson, Giri is accused of orchestrating and sustaining a fraud that targeted investors interested in digital assets.

Under the guise that he operated a private equity investment fund with a focus on investing in digital assets, Giri seized upon the contemporary fervor for digital asset investment opportunities and lured unwitting investors to contribute over $12 million in cash and bitcoins to his funds with the promise of exceptional returns without the risk of financial loss.

CFTC Commissioner Kristin N. Johnson

Giri is accused of diverting investors’ money to his businesses, which include NBD Eidetic Capital, LLC and SR Private Equity, LLC. According to the CTFC, Giri lied to customers by claiming he would re-invest their money in investment funds and provide returns. The funds were instead spent on expensive items by Giri, according to the CTFC.

The complaint also alleges in their solicitations to customers, the defendants omitted material facts, including the defendants misappropriated customer funds to pay profits to other customers in a manner akin to a Ponzi scheme and also misappropriated customer funds to pay for Giri’s lavish lifestyle, which included yacht rentals, luxury vacations and luxury shopping.

CFTC

The complaint also named Giri’s parents, Giri Subramani and Loka Pavani Giri, as relief defendants for possessing funds in which they had no legitimate interest. According to the CTFC, crypto Ponzi schemes have been on a high in recent months.

The agency seeks compensation for defrauded consumers, disgorgement of ill-gotten gains, civil penalties, permanent trading and registration bans, and a permanent injunction against future violations of the Commodity Exchange Act (CEA) and CFTC rules.

CFTC files the charges in collaboration with the SEC

The complaint was filed the day after the CFTC and the Securities and Exchange Commission (SEC) pushed forward a plan to extend reporting requirements for private and large hedge funds to include bitcoin holdings.

The rules are part of a collaborative effort by the country’s regulators to increase public awareness of how private funds operate and what assets they handle. According to the complaint, the CFTC claims that Giri engaged in futures fraud by manipulating information and using “deceptive devices.”

According to Johnson, Giri’s lavish lifestyle was characterized by the use of private jets, yacht rentals, a luxurious vacation home, luxury cars, and expensive designer clothes. This way of life exhibited a complete lack of regard for the investors who had faith in him.

The CFTC is also continuing to investigate Giri and his businesses. The commission has asked him to return any gains or profits derived from the fraud and any money paid in relation to the misconduct, including salaries, commissions, loans, fees, revenues, and trading profits.

Johnson said that the CFTC “rigorously surveys markets and enforces regulations,” but that new financial products, like digital assets, can “create new challenges.”

This case illustrates these dangers, underscores the ever-present threats, and demonstrates that – no matter the asset class – effective enforcement and customer protections must be among our highest priorities.

Kristin N. Johnson

It is critical that all market participants be aware that this conduct will be subject to enforcement action in accordance with CFTCs mission. Recent interest in digital assets and cryptocurrency market companies advertising high yields or promising quick riches but which conceal deceptive schemes that draw from long-forbidden actions is deeply worrisome.

While crypto innovation has several advantages, the CFTC has advised consumers to remain careful. Fraudsters who seek to benefit from an unsuspecting public by taking advantage of popular interest in cutting-edge financial technology will carry out scams that separate investors from their money.