In a significant development in the world of digital assets and trading, Peter Kambolin, the former CEO of Systematic Alpha Management, a digital asset trading firm he founded in 2019, is facing a five-year prison sentence. Kambolin was charged and subsequently pleaded guilty to conspiracy to commit commodities fraud in a Florida court.

Systematic Alpha Management had marketed itself as an investment firm offering algorithmic trading strategies involving digital assets and foreign exchange futures contracts. However, behind the scenes, Kambolin was involved in an illegal cherry-picking scheme that benefited him at the expense of his clients, according to the U.S. Department of Justice (DOJ).

Cherry-picking is a practice where the operator of a trading pool assigns trades to individual accounts post-execution, designating profitable trades to their accounts while shifting losses onto the customers.

What’s more, Kambolin also misrepresented the nature of the trades to his clients. While he claimed to focus exclusively on digital assets and FX futures contracts, it was revealed that half of the funds went into equity index futures contracts. This deception deprived investors, both in the United States and abroad, of profitable trades.

The DOJ alleges that Kambolin directed the ill-gotten profits towards his personal expenses, including renting a beachfront apartment, and transferred some of the proceeds to accounts held by his associates in Dominica and Belarus.

Acting Assistant Attorney General Nicole M. Argentieri of the DOJ’s Criminal Division commented, “The defendant breached the client’s trust for personal profit, undermining investor confidence in the commodities markets. This plea demonstrates that the Justice Department will not allow financial advisors to prioritize their self-interest over clients, including through cherry-picking trades.”

This case is part of the Department’s continued efforts to crack down on financial crimes. Kambolin’s conviction follows recent charges against the founders of scams like IcomTech and AirBit Club, with the operators of the latter collectively sentenced to over 19 years in prison.