US regulator exposes $ 37 million cryptocurrency pyramid scheme

The U.S. Securities and Exchange Commission (SEC) has accused California-based entrepreneur Satish Appalakutty and related companies of creating a multi-million dollar pyramid scheme that caused more than 100 investors to lose a total of $ 37 million.

According to the regulator, Appalakutty, together with Lorven Funds and Lorven Advisors LLC, raised money from early 2019 to March 2024, in particular among the parishioners of a Hindu temple, misleading them about the investment goals. He claimed that he would invest in well-known stocks at a discounted price, stakes in private companies before IPOs, or other instruments that could generate profits.

The SEC alleges that Appalakutty promised investors a guaranteed return ranging from 8% to 62.5% per annum. In fact, according to the investigation, he did not make the declared investments, but used the funds received for his own needs, payments to previous investors and financing of his software startup Vistalytics Inc.

The regulator has already filed a civil lawsuit against Appalakutty and his companies in the U.S. District Court for the Northern District of California. The case file alleges violations of the anti-fraud provisions of the federal securities laws.

In particular, the SEC alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The regulator seeks to bar Appalachian from engaging in or being associated with investment activities, impose civil penalties and permanent injunctions against all defendants.