A judge from the Illinois district court has ruled that two relatively obscure altcoins, OHM and KLIMA, are to be classified as commodities.

The ruling was part of a broader case involving a $120 million crypto Ponzi scheme orchestrated by Sam Ikkurty from Oregon and other affiliated companies.

Detailing Ikkurty’s Ponzi Scheme

Notably, Ikkurty’s scheme promised investors a steady annual return of 15% through investments in various crypto asset commodities. Some crypto instruments involved include Bitcoin, Ether, the unpopular KlimaDAO (KLIMA), and Olympus (OHM).

The US Commodity Futures Trading Commission (CFTC) brought the case to court, asserting that digital assets fall under the same regulatory view as Bitcoin and are subject to futures trading regulations.

KlimaDAO functions primarily as a decentralized autonomous organization (DAO) that aims to address coordination problems in climate finance. The KLIMA coin is the DAO’s governance token.

Despite reaching an all-time high of $3,777 on October 21, 2021, KLIMA’s value has plunged to just $3.55, marking a 99.9% decrease from its highest point.

On the other hand, OlympusDAO strives to create a decentralized reserve currency with its governance token, OHM. Both tokens were relatively obscure before coming into the spotlight in this court case.

In a statement released on July 3, the CFTC revealed that Ikkurty deceived potential investors by claiming to invest only in stable crypto assets. He also exaggerated his past successes to build trust and attract investments.

Contrary to his claims, Ikkurty ran a classic Ponzi scheme, continuously misrepresenting his fund’s performance. Within a few months, the same funds had already lost more than 98.99% of their value.

Crypto Ponzi Scheme Ruling

To hide the fund’s poor performance, Ikkurty redirected substantial portions of the investments to early investors. This move resulted in a $20 million loss for investors in the supposed carbon offset program.

In addition to running a Ponzi scheme, Ikkurty had previously faced a hacking incident that deprived him of all his personal Bitcoin holdings.

Judge Mary Rowland, ruling over the fraudulent case, has ordered Ikkurty to pay over $83.7 million in restitution and an additional $36.9 million in disgorgement.

Meanwhile, the CFTC had initially charged Ikkurty and his associate, Ravishankar Avadhanam, in May 2022. The charges included allegations of fraud and failing to register with the CFTC.

Per the CFTC, Ikkurty and Avadhanam raised over $44 million from at least 170 investors using YouTube videos, a website, and other promotional methods.

The duo told the investors they would use the funds to trade derivatives, digital assets, and commodity futures contracts. This case highlights the cryptocurrency industry’s ongoing regulatory scrutiny and legal challenges.

The Federal Trade Commission (FTC) revealed that over 46,000 individuals reported losing over $1 billion to various crypto scams between January 2021 and June 2022.

This staggering amount only reflects the cases where victims voluntarily came forward to report their losses to authorities.