Digital currency management firm Iterative Capital accused of fraud

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In 2017, Christopher Dannen came up with a great idea. He co-founded Iterative Capital Management (ICM) to give investors a new channel through which they could invest in the expanding digital currency market through trading activity, and began to seek potential investors to attract new business. They would allegedly offer a “highly liquid new fund with quarterly withdrawal rights focusing primarily on trading cryptocurrencies and network tokens,” which sounded good to KDH Consulting Group, an Internet tech support and consulting firm. However, it was actually too good to be true, and KDH has now launched a lawsuit against ICM, accusing its founders of misappropriating funds.

The lawsuit, filed in federal court in New York, accused ICM of having committed “fraud and breach of fiduciary duties” as the company used investment dollars as if they were private savings. ICM inappropriately spent the money, according to KDH, on digital currency mining-related operations, as well as for trading on over-the-counter exchanges, according to the lawsuit. This, after having allegedly lied about previous investment funds it had managed.

KDH ultimately handed over $1 million, turning it into a limited partner of ICM, after being convinced by ICM’s claims. What it didn’t realize was that the company had no intention of using the money as it stated and was already working on its ulterior plans, knowing that trading in digital currencies was becoming obsolete. Additionally, “Individual Defendants failed to mention that, for the same very reason, they returned funds to investors from the previous fund. To the contrary, they praised their prior success and concealed true performance history and investment intentions,” according to the lawsuit.

That was toward the end of December when BTC was enjoying a meteoric and unprecedented rise in value. Those increases undoubtedly played into the decision to invest, but the subsequent nosedive of BTC in January 2018 made KDH question its investment. It requested a payout and was assured by ICM that the money was safe since it hadn’t yet been used for investment purposes. KDH continued to insist on wanting to pull out, but ICM executives stalled and made excuses for not being able to meet with ICM principles.

Determined to recuperate its investment, KDH kept pressuring the company, and ICM reportedly began making haphazard deals for a quick return, but didn’t have any success. After several years of failed attempts, ICM was given a deadline to hand over the funds, which it missed. KDH then “had no other choice but to bring this action by emergency order to show cause to freeze the restructuring and complete dissipation of Plaintiff’s investment with a request for a temporary restraining order to preserve the status quo.”

The lawsuit seeks compensatory and punitive damages, as well as an injunction against ICM to engage in any activity that would cause KDH to be financially harmed. The company also wants any additional awards the court might deem justifiable under the circumstances.