Oregon Judge’s Ruling Narrows Scope of Crypto Ponzi Lawsuit Against Banks
On Thursday, August 1, 2024, Judge Michael H. Simon of the U.S. District Court for the District of Oregon issued an opinion and order in the case of Amit Fatnani versus JPMorgan Chase Bank and others.
The class action lawsuit was brought by Amit Fatnani, individually and on behalf of over 170 others, against eight entities including four major banks. Fatnani claimed the defendants participated in and aided an alleged Ponzi scheme involving cryptocurrency investments organized by Sam Ikkurty and Ravishankar Avadhanam between 2017-2022.
Ikkurty and Avadhanam allegedly solicited over $44 million from investors by selling them unregistered securities through two investment funds, Rose City Income Fund I and Rose City Income Fund II. Investors were told their money would be used to trade and invest in digital currencies like Bitcoin to generate profits, but in reality most funds were used to pay fake returns to other investors in Ponzi scheme fashion.
Over half the money collected was transferred to other investors or companies owned by Ikkurty. $18 million was also transferred offshore with no returns. Ikkurty and Avadhanam ran the scheme out of an apartment in Portland, Oregon using a web of affiliated partnerships and LLCs.
The Commodity Futures Trading Commission has characterized Ikkurty as the mastermind and sued him and Avadhanam, with Avadhanam admitting it was a Ponzi scheme. Fatnani claims to have invested $350,000 total in the funds based on solicitations received in 2021.
The defendant banks – JPMorgan Chase, PNC Bank, Columbia Bank (succeeded by Umpqua Bank), and KeyBank – are alleged to have opened accounts for Ikkurty, Avadhanam, and their affiliated entities that were used to move investor funds and make fake returns. Over $10 million allegedly flowed through one JPMorgan account alone.
The case’s administrator, InterTrust Group, and its subsidiary InterTrust Corporate and Fund Services, are claimed to have processed investments, returns, and statements while knowing the funds generated no actual profits.
Judge Simon granted a motion by PNC Bank to dismiss all claims against it for lack of personal jurisdiction. He also granted a separate motion by InterTrust to dismiss for lack of jurisdiction. However, he allowed some claims against the remaining bank defendants to proceed based on their alleged ties to Oregon. The ruling allows the case to move forward while narrowing its scope.
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