A former CEO of an investment firm has admitted to engaging in a “cherry-picking” scheme regarding crypto futures contracts and foreign exchange contracts.
The practice caused losses for investors, with the ex-CEO using proceeds from the scheme for personal use.
The founder and former CEO of investment firm Systematic Alpha Management LLC (SAM), Peter Kambolin, who between 2019 and 2021 acted as a commodity trading advisor and commodity pool operator, was involved in a practice called cherry-picking, according to a press release by the US Department of Justice.
As stated in the announcement, Kambolin’s cherry-picking scheme enabled him to fraudulently allocate profitable and unprofitable trades in a way that benefited the former CEO’s accounts while incurring losses for investors.
Also, Kambolin misled clients into believing that SAM’s trading strategies focused on crypto futures contracts and foreign exchange futures contracts. In reality, about 50% of the former executive’s transactions in each pool “involved equity index futures contracts.”
According to the DOJ, Kambolin’s actions meant that he defrauded clients within and outside the United States while preventing the investors from making profitable trades.
The Commodities Futures Trading Commission (CFTC) previously filed complaint against SAM and Kambolin, making similar accusations against the company and its CEO. The CFTC alleged that Kambolin and his investment firm unfairly allocated profitable trades to their proprietary accounts while pool participants got unprofitable trades.
According to the complaint, Kambolin and SAM defrauded pool participants and made over $1.5 million in trading profit, while clients suffered trading losses worth over $1.5 million.
The DOJ, in its press release, said the former SAM CEO used the profits from the fraudulent cherry-picking scheme to fund his lifestyle, which included renting a beachfront apartment while also transferring proceeds to Belarusian and Dominican bank accounts controlled by his co-conspirator.
Commenting on the matter, Nicole Argentieri, the Acting Assistant Attorney General, said Kambolin “breached client trust for personal profit,” adding that his conduct “undermines investor confidence in the commodities market.”
The ex-CEO pleaded guilty to conspiracy to commit commodities fraud and possibly faces a maximum sentence of five years imprisonment. However, a sentencing date has not been fixed.