Why the CFTC's 'Ponzi Scheme' Allegation Is Mathematically Impossible

The CFTC's central allegation — that Rose City Fund operated as a Ponzi scheme — is not just factually wrong. It is mathematically impossible, as demonstrated by the independent StoneTurn analysis and the fund's own blockchain records.

What Is a Ponzi Scheme?

A Ponzi scheme has one defining mathematical characteristic: withdrawals must be funded by new investor capital, not by real investment returns. This means:

1. The scheme must continuously attract new investors to pay existing ones
2. The scheme must collapse when new investment cannot cover withdrawals
3. There can be no legitimate returns — all "profits" are simply redistributed capital

Why Our Returns Disprove the Ponzi Theory

Charles R. Soha, CFE, Managing Director at StoneTurn Group, conducted an independent analysis of Rose City Fund's financial records. His findings:

• Fund II investors received returns as high as 339.55% in one year
• Fund I achieved a mean CAGR of 303% for exiting partners

These returns are mathematically impossible in a Ponzi scheme. Here is why:

In a Ponzi scheme, if investors are receiving 303% annual returns, the scheme would need to attract 3x its existing capital base every year just to break even. No Ponzi scheme in history has sustained this — they all collapse within months.

The only explanation for these returns is legitimate investment gains — in this case, from DeFi protocols on the Ethereum blockchain.

The Blockchain Evidence

Every single transaction in Rose City Fund is recorded immutably on the Ethereum blockchain at wallet address 0x168fa4917e7cd18f4ed3dc313c4975851ca9e5e7. This is a public record that anyone can verify.

The blockchain shows:

• $19 million in verifiable DeFi transactions
• Legitimate interactions with DeFi protocols (OHM, KLIMA, and others)
• No evidence of fund commingling or misappropriation

Investigator Dasso admitted under oath: "As far as this case, I did not look at the blockchain, correct." Her answer: "Correct."

The lead investigator in a case involving a DeFi fund never reviewed the blockchain. This is not incompetence — it is willful blindness.

Conclusion

The CFTC's Ponzi scheme allegation fails on every level:

• Mathematically impossible given the verified returns
• Factually disproven by the blockchain records
• Contradicted by the investigators' own sworn testimony

The prosecution of Rose City Fund is not about protecting investors. It is about regulatory overreach — and the evidence proves it.