CEO Pleads Guilty to Manipulating Crypto Futures in Cherry-Picking Scheme
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Former CEO of Systematic Alpha Management LLC (SAM), Peter Kambolin, pleaded guilty to his involvement in a cross-border scheme related to foreign exchange and cryptocurrency futures contracts. He now faces a maximum penalty of five years in prison, pending the announcement of a sentencing date.
Court Filing: Kambolin fraudulently misappropriated profitable trades to himself
In an official press release on October 12, the US Department of Justice (DOJ) revealed that Kambolin, aged 48, had advertised his company as an investment firm specializing in algorithmic trading strategies for futures contracts.
CEO Pleads Guilty to Transnational Scheme Involving Foreign Exchange and Cryptocurrency Futures Contractshttps://t.co/aiafUgfRS3
— Criminal Division (@DOJCrimDiv) October 12, 2023
As a result of this fraud indictment, he potentially faces a maximum prison sentence of five years. However, the duration of his sentence will be determined after a federal district court Judge considers the U.S. Sentencing Guidelines and other statutory factors.
According to the DOJ statement, from January 2019 to November 2021, Kambolin fraudulently allocated profits and losses from futures trades to benefit his accounts.
Additionally, he misrepresented to his clients that Alpha Management LLC employed optimal trading strategies primarily focused on cryptocurrency futures and foreign exchange contracts.
In reality, half of Kambolin’s trading within each pool revolved around equity and index futures contracts.
The erstwhile CEO used this deceptive investment scheme to defraud investors in the United States and other international regions, depriving them of potential profits.
DOJ further revealed that Kambolin used proceeds of the fraudulent scheme to fund his luxurious lifestyle, like rent for a beachfront apartment. Some of these proceeds were routed to foreign bank accounts controlled in Belarus and Dominica.
Meanwhile, Nicole M. Argentieri, the Acting Attorney General of the DOJ Criminal Division, stated that the defendant breached clients’ trust solely for personal profit, undermining investors’ confidence in the commodities market.
She further stressed that Kambolin’s guilty plea reinforced the DOJ’s commitment to curbing financial advisors who prioritize their interests over investors by cherry-picking trades.
CFTC Financial Market Watchtower Hits the Mark Again
The Commodity Futures Trading Commission (CFTC) was the first to level civil charges against Kambolin on April 28. These charges alleged that he had defrauded participants in investment pools and mishandled customer accounts.
As a result, a restraining order was issued to safeguard assets and documents crucial to building the case.
The complaint litigation bordered on Kambolin, alongside his investment firm, Alpha Management LLC, violating CFTC regulations governing the allocation of trades.
Ian McGinley, the Director of Enforcement for CFTC, stated that the defendant promised customers attractive investment opportunities that would be allocated fairly to each account. However, Kambolin took all the profits and shared losses with customers.
Furthermore, the CFTC investigation revealed that the investment scheme generated a minimum of $1,541,559 in total trading profits for Kambolin and his company’s proprietary accounts.
According to the civil charge, the CFTC sought monetary penalties, registration and trading bans, restitution, and a permanent injunction against further violations of the Commodity Exchange Act.
This legal action instigated by the regulatory body led to a preliminary injunction hearing in court on May 8, eventually leading to Kambolin’s recent guilty plea.
