NEBRASKA RESIDENT CHARGED WITH FRUAD IN COMMODITY POOL

The following case is an excerpt from the CFTC website:

"CFTC Charges Grand Island, Nebraska Resident with Fraud and Records Violations in Connection with $4 Million Commodity Pool
Grace Elizabeth Reisinger and ROF Consulting, LLC charged with solicitation fraud and records violations.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a complaint in the U.S. District Court for the District of Nebraska, charging Grace Elizabeth Reisinger of Grand Island, Neb., and ROF Consulting, LLC (ROF) with operating a fraudulent commodity pool scheme. The defendants operated the commodity pool NCCN, LLC (NCCN).

The CFTC complaint, filed on June 29, 2011, alleges that from at least February 28, 2005 to October 26, 2009, Reisinger and ROF fraudulently solicited and accepted approximately $4 million from NCCN pool participants. The defendants allegedly operated NCCN while not being registered as Commodity Pool Operators (CPOs), as required under the Commodity Exchange Act and CFTC regulations. Reisinger also allegedly acted as a CPO for a part of the relevant period under a falsely claimed exemption from the registration requirement.

The complaint also charges Reisinger with making several fraudulent representations to actual and prospective pool participants. Such fraudulent misrepresentations included that she was exempt from the CFTC’s registration requirement, that the pool only solicited and accepted funds from participants who met the definition of a “qualified eligible person” (QEP), and that the minimum required investment in the pool was $5 million. Reisinger and ROF also allegedly failed to (1) furnish pool participants with required monthly account statements and annual reports, (2) advise pool participants that Reisinger and ROF directed fees paid from pool participants’ funds to an undisclosed “foreign introducing broker,” and (3) advise pool participants that Reisinger and ROF were required to be registered as CPOs.

Specifically, the CFTC complaint alleges that months after the date Reisinger and ROF delivered subscription agreements for the pool to some prospective pool participants and began acting as the CPOs of NCCN, she filed a letter with the National Futures Association (NFA) on June 24, 2005 claiming exemption from the requirement to register as a CPO pursuant to CFTC regulation 4.13(a)(4), 17 C.F.R. § 4.13(a)(4)(2005). Accordingly, prior to June 24, 2005, Reisinger acted as the CPO of NCCN without registration or a claimed exemption from registration, according to the complaint. Throughout this same period ROF also allegedly acted as the CPO of NCCN without being registered as a CPO and without a claimed exemption from the requirement to register as a CPO, according to the complaint.

Because Reisinger could not reasonably believe all persons participating in the pool were QEPs, admitted that she “did not know” whether some participants were QEPs at the time she accepted their funds, and failed to provide all participants with the required written statements mandated by CFTC regulation 4.13(a)(5)(i)(A) and (B), 17 C.F.R. § 4.13(a)(5)(i)(A) and (B) (2005), according to the complaint. Reisinger was not eligible for the exemption that she claimed and, therefore, should have been registered as a CPO, according to the complaint.

At no time during the relevant period did Reisinger amend her claimed notice of exemption from the requirement to register as a CPO, despite knowledge that her claimed exemption was invalid, according to the complaint.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent trading and registration bans and a permanent injunction against further violations of the federal commodities laws."