The former CEO of Systematic Alpha Management LLC (SAM), Peter Kambolin, has confessed to his involvement in a fraudulent scheme known as "merit-picking" concerning cryptocurrency futures contracts and foreign exchange contracts. This scheme resulted in financial losses for investors, as Kambolin manipulated trades to benefit himself personally. Kambolin, who served as the founder and CEO of SAM, a commodities trading advisor and commodity pool operator between 2019 and 2021, was charged by the U.S. Department of Justice with perpetrating this fraudulent scheme.
The merit-picking scheme enabled Kambolin to selectively allocate profitable and unprofitable trades, effectively favoring his own account while causing financial harm to investors. Furthermore, Kambolin misled clients by falsely presenting SAM's trading strategies as focusing on cryptocurrency and foreign exchange futures contracts when, in reality, approximately 50% of the trades in each pool involved stock index futures contracts. As a result, investors were denied the opportunity to make profitable trades.
The U.S. Commodity Futures Trading Commission (CFTC) previously filed a lawsuit against SAM and Kambolin, leveling similar accusations against both the company and its CEO. The CFTC alleges that Kambolin and SAM unjustly favored their proprietary accounts by allocating profitable trades, while participants in the pools incurred losses.
According to the CFTC's complaint, Kambolin and SAM deceived pool participants, resulting in over $1.5 million in trading profits for themselves while investors suffered losses exceeding $1.5 million. Kambolin utilized the proceeds from the fraudulent merit-picking scheme to support his personal lifestyle, including the rental of beachfront condominiums and the funneling of funds to Belarusian and Dominican banks controlled by co-conspirators.
Acting Assistant Attorney General Nicole Argentieri commented on the case, asserting that Kambolin had "betrayed the trust of his clients for personal gain." She added that his actions had a detrimental effect on investors' confidence in commodity markets. Kambolin has pleaded guilty to conspiracy to commit commodities fraud, potentially facing up to five years in prison. Nevertheless, a sentencing date has yet to be established.
