The Commodity Futures Trading Commission (CFTC) has filed charges against Peter Kambolin’s foreign exchange (FX) and cryptocurrency business, Strategic Asset Management (SAM), accusing the firm of profiting off customers’ losses. The charges stem from alleged fraudulent practices that spanned over a year, resulting in the company reaping millions in illicit gains.
According to the CFTC, SAM “systematically” defrauded their customers by manipulating trading software to generate losses for their clients. The complaint states that SAM executives manipulated algorithms to give the appearance of profitable trades when in reality, the software generated trades that were opposite of what was intended. As a result, customers lost money while SAM profited from the scheme.
The CFTC alleges that Kambolin and other SAM executives were aware of the fraudulent scheme and failed to take any remedial action to protect customer funds. The complaint further alleges that Kambolin and his colleagues provided misleading information to customers, including falsely representing their trading expertise and guaranteeing profits.
SAM was founded in 2017 and claimed to specialize in cryptocurrency trading with a focus on artificial intelligence and machine learning. The company offered a range of services, including asset management, cryptocurrency trading, and Forex trading. According to reports, the company attracted high net worth clients by offering the potential for lucrative returns with minimal risk.
The CFTC’s charges come after an investigation into the company’s practices, which revealed damning evidence of unlawful acts. In addition to manipulating trading algorithms, the investigation found that SAM also misrepresented its track record, lied about its assets-under-management, and neglected to provide proper risk disclosures to clients.
The CFTC is seeking restitution, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and other relief to prevent SAM and its executives from engaging in fraudulent activity in the future.
The charges are a stern warning to other companies in the FX and cryptocurrency realm. The currency markets are notoriously volatile, and investors must remain vigilant in protecting themselves from fraud and manipulation, as several recent cases have demonstrated.
In one case, a group of cryptocurrency traders were charged with manipulating the market and generating a profit of over $17 million in what authorities described as fraudulent activities. In another case, a well-known cryptocurrency exchange was fined for misleading investors and manipulating prices.
As cryptocurrencies continue to grow in popularity, regulators are responding with increased scrutiny and enforcement activities. The CFTC is leading the charge, issuing orders and enforcement actions against individuals and companies that engage in illegal activities. The charges against SAM are part of a broader effort to protect investors and promote transparency in the currency markets.
In response to the charges, Kambolin and SAM issued a statement denying any wrongdoing and describing the allegations as “baseless and without merit.” The company asserted that it had cooperated fully with the CFTC’s investigation and had provided all the information requested.
However, the CFTC has stated that the evidence against SAM is “overwhelming” and that the company’s fraudulent activities were “systematic” and “intentional.” The charges against SAM should serve as a warning to other companies in the industry that regulators are watching and will take action against those who engage in fraudulent activities.
The bottom line is that investors must remain vigilant, especially when dealing with high-risk markets like Forex and cryptocurrencies. Companies that make bold promises of high returns with minimal risk may be engaging in fraudulent activities. Investors must conduct thorough due diligence before making any investment decisions and remain suspicious of unrealistic claims. The CFTC’s charges against SAM should serve as a wake-up call to investors and traders alike to exercise caution and avoid falling victim to fraudulent activities.
Systematic Alpha Management, LLC (SAM), a registered commodity trading advisor and commodity pool operator, along with its owner and leader, Peter Kambolin, have been charged by the Commodity Futures Trading Commission (CFTC) for unfairly allocating trades between certain commodity pools and managed account customers and certain of their proprietary accounts. The CFTC alleges that the defendants defrauded pool participants and managed account customers, and caused them to incur net trading losses of more than $1.5 million while generating more than $1.4 million in profits for their proprietary accounts.
According to the CFTC, the defendants promised customers investment opportunities that would be allocated fairly and equitably among customer accounts and proprietary accounts. However, in reality, the defendants took most of the profits and gave the losses to their customers. The CFTC seeks monetary penalties, disgorgement, restitution, registration and trading bans, and a permanent injunction against the defendants.
SAM allegedly offered customers automatic, algorithm-based trading strategies involving futures that customers could participate in either through commodity pools or managed accounts. Between January 2019 and November 2021, one pool was allegedly focused on trading various exchange-listed cryptocurrency futures contracts, and another focused on trading various exchange-listed foreign exchange (FX) futures contracts. The defendants also traded for at least four individual managed accounts. The defendants often executed trades for these commodity pools and managed accounts together with trades they executed on behalf of their proprietary accounts, and then allocated the trades among all of the accounts at the end of each trading day.
However, SAM and Peter Kambolin allegedly unfairly and inequitably allocated trades between the commodity pools and managed accounts and their proprietary accounts by consistently allocating trades they knew were profitable to their proprietary accounts, while allocating unprofitable or less profitable trades to the commodity pools and managed accounts. This behavior caused the commodity pools and managed accounts to incur net trading losses of more than $1.5 million, and generated more than $1.4 million in profits for their proprietary accounts.
CFTC Director of Enforcement Ian McGinley stated, “The CFTC will aggressively pursue advisors and intermediaries who defraud their customers for their own personal gain, no matter what form it takes. This action further demonstrates the CFTC’s effective data analysis capabilities to proactively identify and prosecute misconduct.”
This case highlights the importance of transparency and fairness in allocating trades among customers and proprietary accounts, and the consequences of not doing so. Investors should always perform due diligence and thoroughly investigate the track record, reputation, and business practices of financial advisors and trading professionals they are considering working with. By doing so, investors can better protect themselves and minimize the risk of financial fraud and misconduct.