The former CEO of Systematic Alpha Management LLC (SAM), Peter Kambolin, has pleaded guilty to a conspiracy to commit commodities fraud involving crypto futures contracts. Kambolin, the former CEO of a Miami-based investment firm, was charged with operating a “cherry-picking” scheme, which he admitted to. Cherry-picking refers to an illicit securities trading tactic where a trader executes transactions without immediately assigning them to a specific trading account, waiting to determine whether the trades yield profits or losses.
Kambolin’s scheme involved deceiving investors by falsely claiming that his fund focused on trading cryptocurrency and foreign exchange futures. However, approximately half of his trading activities in each pool were involved in equity index futures contracts. This fraudulent practice allowed Kambolin to divert the gains for his personal expenses, such as covering the rent for a beachfront apartment.
Kambolin’s fraudulent activities were not limited to the United States. He transferred the proceeds of his scheme to foreign bank accounts controlled by a co-conspirator in Belarus and Dominica. The scheme defrauded investors domestically and internationally, leading to significant financial losses for those involved.
“This isn’t the first time federal agencies have taken issue with the way Kambolin ran his firm,” says Shimon Richmond, Assistant Inspector General for Investigations.
In May, the Commodity Futures Trading Commission (CFTC) brought civil charges against Kambolin and Systematic Alpha Management, LLC (SAM), accusing them of engaging in unfair trade allocation practices and making false representations to participants in commodity pools and managed accounts. These actions resulted in defrauding pool participants and managed account customers, yielding substantial trading profits for their proprietary accounts.
As a consequence of the CFTC’s allegations, legal action is being pursued to secure monetary penalties, disgorgement of ill-gotten gains, and restitution to affected parties. The CFTC also seeks registration and trading bans, as well as a permanent injunction to prevent further violations of the Commodity Exchange Act and CFTC regulations.
“The case against Kambolin demonstrates the commitment of federal agencies to safeguard investors and uphold the integrity of the financial markets,” states an unidentified spokesperson from the United States Department of Justice.
In April, U.S. District Judge Robert N. Scola, Jr. issued a statutory restraining order against Kambolin and SAM, which froze their assets and granted the CFTC immediate access to their financial records. Kambolin has pleaded guilty to his involvement in the fraudulent practices and faces a maximum penalty of five years in prison. Sentencing will take place on an undisclosed future date.
