A cryptocurrency investment management company allegedly lured investors into a fraudulent fund, using the capital for personal gain, according to new complaint.
Internet tech support and consulting player KDH Consulting Group recently filed an official complaint against crypto investment management firm Iterative Capital Management for alleged fraud and deception.
Accusations include “fraud and breach of fiduciary duties, among other things,” the April 27 filling stated.
Iterative Capital allegedly falsely boasted of previous crypto investment and trading success and liquidity related to a “hedge fund-like” account, which they urged KDH to join.
Instead of using the capital as stated, for crypto investment and trading profit, the filing accuses Iterative Capital of taking the assets appropriated to the account and treating them as private savings, spending on crypto on mining endeavors and over-the-counter, or OTC, trading.
The allegedly fraudulent firm attracted KDH back in the latter half of 2017. Christopher Dannen, Interative Capital’s co-founder, recapped two previously fruitful accounts, proposing “a highly liquid new fund with quarterly withdrawal rights focusing primarily on trading cryptocurrencies and network tokens,” the filing explained.
Iterative Capital, however, allegedly knew crypto trading was on its way out during its push for KDH’s capital in December 2017, and prepared to put the money toward mining without disclosure.
“Moreover, Individual Defendants failed to mention that, for the same very reason, they returned funds to investors from the previous fund,” the filing read. “To the contrary, they praised their prior success and concealed true performance history and investment intentions.”
KDH put $1,000,000 into the fund, attaining limited partner status in the process. In the years following, Interative Capital allegedly dodged investors and altered plans without returning capital, bleeding value in the processes.
Over the past two years, a number of legal disputes have surfaced stemming from 2017 activities, showing the industry’s transition out of its Wild West period.