CFTC Charges Individual, His Parents and His Firm in $12 Million Digital Asset Ploy

The Commodity Futures Trading Commission (CFTC) has filed charges against Rathnakishore Giri and his firms, NBD Eidetic Capital, LLC and SR Private Equity, LLC, alleging digital asset trading ploy that pilfered $12 million from unsuspecting investors. The CFTC also filed charges against Giri’s parents, Giri Subramani and Loka Pavani Giri, as relief defendants as allegedly they held funds with no legitimate interest. Giri and his firms are all Ohio based.

The CFTC complaint charges that from approximately March 2019 through the present, the defendants solicited and accepted over $12 million and more than 10 Bitcoins from at least 150 customers to invest in various digital asset investment funds purportedly operated by the defendants.

According to the complaint, the defendants made false and misleading statements claiming guarantees of profits as Giri described himself as a successful digit asset trader. Customers were guaranteed that they would not lose their initial investment.

The CFTC states that Giri operated similar to a Ponzi scam, using new funds to satisfy others redemptions. Meanwhile, he used the funds on a “lavish lifestyle” including “yacht rentals, luxury vacations and luxury shopping.”

The CFTC complaint also alleges the defendants commingled customer funds with Giri and the relief defendants’ funds when the defendants transferred customer funds to Giri and the relief defendants’ personal bank and digital asset trading accounts.

CFTC Commissioner Kristin N. Johnson issued a statement on the charges stating novel financial products 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.”

The CFTC seeks restitution to defrauded customers, 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 enforcement action has been filed in the U.S. District Court for the Southern District of Ohio.

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