Revealing the Case: American Financial Manager Secretly Invests $18.5 Million in Crypto, Targeting the Muslim Community

Detailed Summary:

The Case and Method of Operation

Khalid Parekh, a financial manager in Texas and owner of Fair Invest, raised $18.5 million from 373 investors across 40 states from August 2021 to August 2022. He targeted the Muslim community in the U.S. through radio programs, podcasts, and interviews, claiming that the investments complied with Islamic law and promised a 4% annual return.

Violations

Instead of investing in traditional assets such as stocks, mutual funds, and commodities as promised, Parekh secretly diverted client funds into two cryptocurrency lending platforms. He did not disclose this to the investors, creating a conflict with the initial commitments.

Penalties and Consequences

Parekh agreed to pay a $100,000 fine after being investigated by the U.S. Securities and Exchange Commission (SEC). During the investigation, he refunded the entire principal and the promised 4% profit to the investors. Parekh also withdrew his investment advisory registration with the SEC.

Wider Impact

This event occurs amidst the SEC tightening regulations on cryptocurrency activities. However, some industry experts hope this pressure will ease as the current SEC Chairman, Gary Gensler, is expected to resign on January 20, 2025. Donald Trump, who once claimed he would be the “president of crypto,” is expected to appoint a more industry-friendly head of the SEC.

The SEC declined to comment further on this case.