Yesterday, the Commodity Futures Trading Commission (CFTC) filed an injunctive action in the Southern District of Ohio against Rathnakishore Giri (Giri) and his companies, SR Private Equity, LLC and NBD Eidetic Capital, LLC.  As alleged in the complaint, Giri engineered and perpetuated a Ponzi scheme designed to defraud investors interested in investing 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.

The complaint alleges that Giri enticed his customers by making false and misleading statements touting his experience, guaranteeing customers profits, and ensuring customers that they could withdraw their initial investment and profits at any time.  The complaint also alleges that rather than using customer funds to acquire and trade digital assets as promised, Giri simply pocketed customers’ money, using their invested funds to bankroll his lavish lifestyle—characterized by use of private jets, yacht rentals, an extravagant vacation home, a luxury car, and expensive clothing.  In other instances, Giri distributed newly solicited investors’ contributions to existing investors, misleadingly describing the contributions as the “profits” of the funds’ successful trading strategies.  While the CFTC rigorously surveils markets and enforces regulations in accordance with its mandate to protect customers, novel financial products may create new challenges.  Identifying and policing fraud in these emerging markets may be difficult or delayed in light of the agency’s limited visibility in these markets.

It is imperative that all market participants understand that such conduct will be subject to enforcement actions in accordance with our mandate.  Recent attraction to digital assets and cryptocurrency market firms proclaiming high yields or promising instant wealth, but obscuring deceptive schemes that borrow from long-prohibited behavior is deeply concerning.  While there are many benefits to responsible innovation, customers must remain vigilant.  Fraudsters who seek to take advantage of an unsuspecting public will exploit popular interest in innovative financial technology and perpetrate scams that separate investors from their hard-earned money.  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. 

I applaud the diligent work of our Enforcement team including Dmitriy Vilenskiy, Karen Kenmotsu, Luke B. Marsh, and Paul G. Hayeck, who filed this case and continue to pursue justice for the victims.