Former CEO of Miami Investment Firm Pleads Guilty to Crypto Futures Fraud Conspiracy
The former CEO of Systematic Alpha Management LLC (SAM) pleaded guilty to a conspiracy to commit commodities fraud involving crypto futures contracts, and he is potentially facing up to a five-year prison sentence.
CEO Pleads Guilty to Transnational Scheme Involving Foreign Exchange and Cryptocurrency Futures Contractshttps://t.co/aiafUgfRS3
— Criminal Division (@DOJCrimDiv) October 12, 2023
On October 13, the United States Department of Justice said that Peter Kambolin, the former CEO of a Miami-based investment firm, was charged with operating a “cherry-picking” scheme, which he pleaded guilty to.
Cherry-picking refers to an illicit securities trading tactic in which a trader executes transactions without immediately assigning them to a specific trading account. They do this until they ascertain whether the trades yield profits or losses.
In Kambolin’s case, the scheme involved promoting his company as a provider of algorithmic trading strategies involving futures contracts, including cryptocurrencies and commodities.
However, Kambolin deceived investors by falsely claiming that his fund focused on trading cryptocurrency and foreign exchange futures. In contrast, approximately half of his trading activities in each pool were involved in equity index futures contracts.
As per the Department of Justice (DOJ), Kambolin committed fraud against investors, both domestically and internationally. He withheld profitable trades, diverting the gains for his expenses, such as covering the rent for a beachfront apartment.
An account of a co-conspirator has been linked to the case where he transferred the proceeds of his scheme to foreign bank accounts controlled by the co-conspirator in Belarus and Dominica.
Shimon Richmond, Assistant Inspector General for Investigations said that;
“Yesterday’s plea recognizes the importance of holding the defendant accountable for his actions in misleading and defrauding investors through a cherry-picking scheme, and using proceeds from the scheme to fund his own personal lifestyle.”
CFTC Pursues Legal Action Against SAM and Kambolin for Unfair Trade Practices
This isn’t the first time federal agencies have taken issue with the way Kambolin ran his firm.
In May, the Commodity Futures Trading Commission (CFTC) also brought civil charges against him, where they alleged that Systematic Alpha Management, LLC (SAM) and Kambolin engaged in unfair trade allocation practices between specific commodity pools, managed account customers, and their proprietary accounts.
They accused them of making false representations to participants in these pools and managing account customers while violating CFTC regulations related to trade allocation.
As a result of these actions, SAM and Kambolin defrauded pool participants and managed account customers, yielding total trading profits of at least $1,451,559 for their proprietary accounts.
The CFTC is pursuing legal action to secure monetary penalties, disgorgement of ill-gotten gains, restitution to affected parties, registration and trading bans, and a permanent injunction to prevent further violations of the Commodity Exchange Act and CFTC regulations.
Later in April, U.S. District Judge Robert N. Scola, Jr. issued a statutory restraining order against the defendants, which effectively froze their assets and granted the CFTC immediate access to their financial records.
He has pleaded guilty to his involvement in the fraudulent practice and will now face a maximum penalty of five years in prison.
However, the date of his sentencing hearing will occur on an undisclosed date in the future.
