The former Systematic Alpha Management LLC (SAM) CEO, Peter Kambolin, has confessed to orchestrating a deceptive “cherry-picking” scheme involving cryptocurrency futures contracts.
Cherry-Picking is a fraudulent trading practice in which a person executes trades without assigning those trades to a particular trading account until the individual determines whether or not the trade has become profitable or suffered losses.
In other words, the person “cherry-picks” the profitable trades for themselves and assigns the unprofitable trades to their clients. This practice is illegal and unethical, and it can result in significant financial losses for investors.
A Pioneering Case: Crypto’s “Cherry-Picking” Scandal
Between January 2019 and November 2021, Kambolin, who presented SAM as an investment firm specializing in algorithmic trading strategies for futures contracts, engaged in this complex cherry-picking scheme. He allocated trades without immediate assignment to specific accounts, allowing him to exploit profitable outcomes while shifting losses to his clients.
Additionally, he misrepresented his fund’s focus on cryptocurrency and foreign exchange futures contracts when a significant portion of his trading involved equity index futures contracts. While this approach was unethical, it enabled Kambolin to manipulate the system for his benefit for nearly three years.
Kambolin’s wrongdoing extended beyond manipulating the trading system. He also diverted profits, defrauding investors both in the United States and abroad and depriving them of profitable trades.
Instead of safeguarding the funds or reinvesting them, he used them to fund his lavish lifestyle, including renting a luxurious beachfront apartment. Moreover, he strategically moved a portion of these ill-gotten gains into foreign accounts he controlled in Belarus and Dominica, an action that created hurdles for authorities in tracking the money trail.
According to Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division,
“The defendant breached client trust for personal profit.” “This conduct undermines investor confidence in the commodities markets.”
Legal Repercussions
Peter Kambolin’s fraudulent actions have come back to haunt him. After pleading guilty to conspiracy to commit commodities fraud, he now faces the prospect of a maximum five-year prison sentence. Notably, the Department of Justice (DOJ) said a sentencing date has not yet been set.
