New York Crypto Firm Iterative Capital Sued for Mishandling Funds

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A New York-based cryptocurrency investment firm is being sued by investors who accuse it of deceiving them and misappropriating their funds. In a case that is becoming all too familiar in the cryptocurrency world, Iterative Capital has been accused of luring investors into signing up based on fraudulent historical performance claims and diverting millions of dollars of fund money to fund a lossmaking crypto mining enterprise.

Funds are Safu

Iterative Capital, a company founded by Christopher Dannen and Brandon Buchanan, first met with the representatives of KDH Consulting in late 2017 at a time when they were seeking investment for a supposed crypto trading fund. KDH agreed to hand over $1 million to the fund managers, allegedly based on fraudulent historical performance data, only to request a withdrawal shortly after when the crypto bubble burst.

According to the complaint, Dannen and Buchanen denied this request, reassuring KDH that the money was safe. In fact, the company had allegedly already poured KDH’s money, as well as another $6.5 million from other investors, into a crypto mining operation that was already losing money.

Delaying Tactics

The suit alleges that as 2018 progressed, the fund “employed tactics of delay, misrepresentations and self-dealing” in order to keep investors at bay and try to turn around the ailing mining business with investor funds. They also allegedly cancelled meetings at the last minute and then left New York, all tactics that point to a crypto investment scam.

As things got worse for Iterative, they allegedly “engaged in additional flagrant breaches of their fiduciary duties, duties of good care and loyalty”, resulting in them locking the remaining funds in a mining “side pocket” which was untouchable to investors.

$14.88 Million Raised

Their most recent move was to merge two operations, and therefore further locking up investor funds, presenting the matter as a fait accomplit, despite needing investor consent to do so. With a deadline from Iterative looming, KDH decided to bring the matter to court.

KDH have asked the court to “freeze the restructuring and complete dissipation of Plaintiff’s investment” while also requesting a restraining order to “preserve the status quo”. In total, Iterative raised over $14.88 million from investors, but it is not known how much of that is left to repay investors should they win the forthcoming court case.