The former CEO of a digital asset trading firm that assigned the profits of his trades to his own accounts and the losses to his customers faces five years behind bars.
Peter Kambolin was charged with and pleaded guilty to conspiracy to commit commodities fraud at a Florida court.
CEO Pleads Guilty to Transnational Scheme Involving Foreign Exchange and Cryptocurrency Futures Contractshttps://t.co/aiafUgfRS3
— Criminal Division (@DOJCrimDiv) October 12, 2023
According to the U.S. Department of Justice (DOJ), Kambolin was the CEO of Systematic Alpha Management, an investment firm he founded in 2019. He marketed it as offering algorithmic trading strategies involving digital assets and foreign exchange futures contracts. However, behind the scenes, he was illegally engaging in a cherry-picking scheme to benefit himself at the expense of his clients, DOJ says.
Cherry-picking is a practice in which the operator of a trading pool only assigns trades to individual accounts post-execution. The operator designates the trades to their accounts if they are profitable while the customers bear the losses.
Additionally, Kambolin misrepresented the trades to his clients, claiming he focused exclusively on digital asset and FX futures contracts while half the funds went to equity index futures contracts.
“In doing so, Kambolin defrauded investors located in the United States and abroad by, among other things, depriving them of profitable trades,” the Justice Department alleges.
The department further alleges that the U.S.-Russian national channeled the ill-gotten profits to his expenses, including renting a beachfront apartment. He also transferred some of the proceeds to his accomplices’ accounts in Dominica and Belarus.
“The defendant breached the client’s trust for personal profit. This conduct undermines investor confidence in the commodities markets. This plea demonstrates that the Justice Department will not allow financial advisors to place their self-interest ahead of clients, including by cherry-picking trades,” commented Acting Assistant Attorney General Nicole M. Argentieri of the DOJ’s Criminal Division.
The department’s crackdown on crime continues, with Kambolin the latest to be held accountable for his crime. In recent weeks, the DOJ has charged the founders of scams like IcomTech and AirBit Club, with four operators of the latter collectively sentenced to over 19 years in prison.
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