• Federal court ordered William Koo Ichioka to pay $31 million in restitution and $5 million in monetary penalty.
• The New York resident was charged and ordered to pay the total $36 million for defrauding victims in a forex and crypto scheme.

A New York man is to pay a total of $36 million for defrauding victims in a scheme involving forex and crypto.

In a press release on Sept. 20, the CFTC said William Koo Ichioka, formerly of San Francisco, will pay $31 million in restitution to the victims of his fraudulent scheme and $5 million in civil monetary penalty.

The fine was handed by Judge Vince Chhabria of the U.S. District Court for the Northern District of California in an order given on Sept. 19.

CFTC filed charges against Ichioka in June 2023

The CFTC filed a civil enforcement action against Ichioka in June 2023. The charges involved the fraudulent soliciting and stealing over $21 million from more than 100 commodity pool participants. Ichioka admitted to the charges and agreed to an order of judgment.

Allegations against Ichioka related to a scheme from 2018 that lied to unsuspecting participants in investment funds.

The individual claimed investors would get a 10% return on their funds every 30 days. However, this did not happen and Ichioka commingled funds from victims with his own money, using these funds on personal expenses such as rent, jewelry and luxury vehicles.

“To conceal his fraudulent activity, Ichioka overstated the value of assets he held by generating false financial documents and presenting false account statements to participants,” CFTC noted in the press release.

Parallel criminal case

Ichioka also pleaded guilty to charges filed by the Department of Justice in June 2023, with the case running parallel to the CFTC complaint. Charges included wire fraud, false tax returns and commodities fraud. For the five counts, the court sentenced Ichioka to 48 months in prison.

He also received a 5-year supervised release sentence. The court imposed a $5 million fine and $31,330,715.86 in restitution.

On August 14, 2023, the court ordered a permanent injunction and prohibited Ichioka from any future violations. He was also barred from trading in any CFTC-regulated markets or registering with the regulator.

According to the CFTC, that order and the monetary penalty mark the end of CFTC’s enforcement action against the New York resident.

The U.S. Commodity Futures Trading Commission (CFTC) is challenging a recent court decision that would allow prediction market platform Kalshi to offer contracts related to U.S. election outcomes. The ongoing legal battle has raised concerns about the integrity of election betting and the extent of the CFTC’s regulatory authority.

Court Hearing Pits CFTC Against Kalshi

At a hearing before the U.S. Court of Appeals for the District of Columbia Circuit, CFTC General Counsel Rob Schwartz and Kalshi’s counsel Yaakov Roth argued as to why the firm should be allowed to operate political prediction markets. The hearing was held after a district court decision that said the CFTC cannot stop it from offering contracts based on which party will control both the houses of the Congress.

Soon after the decision, the CFTC went for an application for a temporary stay which was granted by the appeals court.

Appeals court judge: “is there any evidence, as opposed to ‘reason to believe’ or hypothesizing … that short term manipulations of election betting markets do affect election process or outcome?”
CFTC gc: “I don’t have that.”

Hearing in Kalshi case: https://t.co/2mPz6P2M7F

— m/arc 🧭 (@MarcHochstein) September 19, 2024

The three judges, Patricia Millett, Cornelia Pillard and Florence Pan, challenged both the arguments and appeared rather skeptical of the reasoning provided. The judges questioned the CFTC about its view on the Commodity Exchange Act, as well as the consequences of permitting the opportunity to place a bet on the electoral outcome.

Concerns Over Market Manipulation and Election Integrity

The U.S. Commodity Futures Trading Commission’s concerns included threats to market integrity and manipulation of election-related prediction markets. Schwartz pointed out that the political prediction markets are more susceptible to false information and manipulation as compared to other event markets.

He stated that permitting these contracts could lead to misperceptions among the public and thus erode the already weak confidence in the U. S. elections, particularly during a time when more citizens doubt the validity of the electoral system.

Schwartz also noted that while traditional futures contracts are based on factual and accurate information, political markets could be skewed by fake polls, fake news, and other agenda-driven media. He noted that the CFTC cannot adequately monitor these underlying events and therefore it remains challenging to promote fairness and transparency in the markets.

Kalshi Defends Market Viability and Regulatory Compliance

Kalshi’s attorney, Yaakov Roth, pushed back against the concerns surrounding Kalshi’s compliance measures, noting that regulated prediction markets are more transparent and provide more oversight than less regulated foreign platforms. Roth argued that markets that are supported by a robust and comprehensive legal regime are less likely to be manipulated than the unregulated foreign markets that Kalshi seeks to compete with, while operating in a regulated environment.

According to Roth, the firm has also incorporated ‘Know Your Customer’ measures to ascertain that only approved market players transact and recommended that there should be a local regulated market to overcome the dependency on overseas markets with less transparency. He maintained that permitting these regulated prediction markets would offer better protection to the participants and minimize the chances of distortion by foreign elements.

Hence, in the upcoming 2024 U. S. elections, the appeals court is expected to make a ruling as soon as possible. The CFTC has been working on a regulation that is likely to prohibit the trading on political events as the commission says that such contracts are detrimental to the public interest. Legal experts have argued that the courts or the legislature may have to step in and offer guidance on the future of election-related prediction markets.

CFTC Chairperson Rostin Behnam has also expressed concerns over the likelihood of the financial regulator being involved in election contracts, saying that such actions may be outside the scope of the agency.

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Kelvin Munene Murithi

Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.

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