CFTC CHARGES COMPANY AND OWNER WITH COMMODITY POOL FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Charges North Carolina Resident Edwin A. Vasquez and His Company Vasquez Global Investments, LLC with Commodity Pool Fraud

Court Grants Restraining Order Freezing Defendants’ Assets and Protecting Books and Records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of an enforcement action in the U.S. District Court for the Western District of North Carolina on July 30, 2014, charging Defendants Edwin A. Vasquez of Arden, North Carolina, and Vasquez Global Investments, LLC (VGI), a North Carolina company, with misappropriation, solicitation fraud, and issuing false statements in connection with the operation of an unregistered commodity trading pool.

On August 1, 2014, Federal District Judge Martin Reidinger issued a restraining Order that freezes Vasquez’s and VGI’s assets, protects books and records, and schedules a hearing on August 15, 2014, to consider the CFTC’s request that the court preliminarily enjoin Vasquez and VGI from future violations of the federal commodity laws, as alleged.

According to the CFTC Complaint, beginning in August 2011, Vasquez, acting individually and through VGI, defrauded and deceived at least 19 participants who invested at least $583,491 in a commodity pool commonly known as the VGI pool.

Specifically, the Complaint alleges that Vasquez told prospective pool participants that he was a successful trader and that the VGI pool was a “no risk” investment.  The Complaint further alleges that, of the $583,491 solicited and accepted from pool participants, Vasquez and VGI lost $65,374 trading commodity futures and returned $186,561 to pool participants as purported profits in the manner of a Ponzi scheme. In addition, Vasquez and VGI allegedly misappropriated the remaining $331,556 by using those funds to pay for VGI’s operating costs and for Vasquez’s personal expenses, including travel, restaurants, rent, cash withdrawals, and retail purchases.

Vasquez did not disclose his trading losses and misappropriation and, instead, issued false statements to the pool participants regarding the profitability and value of their shares of the pool, according to the Complaint. Vasquez and VGI are also charged with commingling pool participant funds and with registration violations.

In its continuing litigation against the Defendants, the CFTC seeks a civil monetary penalty, payment of restitution of losses to customers, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC appreciates the assistance of the North Carolina Department of the Secretary of State, Securities Division.

The CFTC Division of Enforcement staff members responsible for this case are Elizabeth N. Pendleton, Joseph Patrick, Scott Williamson, and Rosemary Hollinger.

CHICAGO RESIDENT ORDERED TO PAY OVER $1.3 MILLION TO SETTLE SETTLE FOREX PONZI SCHEME

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court Orders Chicago Resident Christopher Varlesi to Pay over $1.3 Million to Settle Ponzi Scheme Fraud and Misappropriation Action

Varlesi used misappropriated investor funds for business and personal expenses, such as entertainment, travel, restaurants, his children’s tuition, and spa treatments

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order against Defendant Christopher Varlesi of Chicago, Illinois, individually and doing business as Gold Coast Futures and Forex, requiring him to pay restitution of more than $638,000 to defrauded investors and a $700,000 civil monetary penalty. The consent Order of permanent injunction, entered June 12, 2013, by Judge James B. Zagel of the U.S. District Court for the Northern District of Illinois, also imposes permanent trading and registration bans against Varlesi and prohibits him from violating the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The Order stems from a CFTC Complaint filed March 7, 2012, charging Varlesi with fraudulently operating a commodity pool to trade commodity futures and off-exchange foreign currency (forex), making false statements to pool participants, misappropriating pool funds, and failing to register with the CFTC as a Commodity Pool Operator.

The Order finds that Varlesi solicited and accepted at least $1.7 million from at least 20 individuals to trade commodity futures and forex contracts by touting his past trading record and ability to profitably trade futures and forex contracts. In exchange for their investment, Varlesi issued promissory notes to pool participants purportedly paying a fixed monthly interest rate on principal, according to the Order. However, Varlesi used no more than $220,000 of the $1,716,169 that he accepted from pool participants to trade commodity futures and forex contracts, the Order finds. Varlesi spent misappropriated investor funds on business and personal expenses, including food, utilities, gas, life insurance, entertainment, travel, restaurants, his children’s tuition, and spa treatments and used approximately $1,343,471 to pay participants purported profits in the manner of a Ponzi scheme, according to the Order.

To perpetuate the fraud, Varlesi made false verbal representations and provided pool participants with fabricated account statements and false account performance documentation, showing that their investments were growing, according to the Order. In fact, the Order finds that Varlesi knew the representations, statements, and account performance documentation were false because he failed to disclose to pool participants that he had misappropriated a significant amount of the pool’s money.

In or around March 2011, Varlesi stopped making interest payments on the promissory notes and admitted to a pool participant that there was no money in his account, the Order finds. Furthermore, despite subsequent promises to repay the pool participants, Varlesi has not done so and still owes 17 pool participants approximately $638,227, the Order finds.

The CFTC appreciates the assistance of the United States Attorney’s Office for the Northern District of Illinois and the Illinois Secretary of State Securities Department.

CFTC Division of Enforcement staff members responsible for this case are Robert Howell, Mary Elizabeth Spear, Ava M. Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

CFTC CHARGES MAN/COMPANY WITH EMBEZZLEMENT BY PONZI SCHEME

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

CFTC Charges North Carolina Resident Michael Anthony Jenkins and his Company, Harbor Light Asset Management, LLC, with Solicitation Fraud, Misappropriation, and Embezzlement in Ponzi Scheme

Defendants charged with fraudulently soliciting and accepting at least $1.79 million from approximately 377 persons

In a related criminal action, Jenkins was indicted for securities fraud and is in custody awaiting trial

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal civil enforcement action in the U.S. District Court for the Eastern District of North Carolina, charging Michael Anthony Jenkins of Raleigh, N.C., and his company, Harbor Light Asset Management, LLC (HLAM), with operating a Ponzi scheme for the purpose of trading E-mini S&P 500 futures contracts (E-mini futures). From at least January 2011 through January 2012, the defendants fraudulently solicited at least $1.79 million from approximately 377 persons, primarily located in Raleigh, N.C., in connection with the scheme, according to the complaint.

The CFTC complaint also charges Jenkins, the owner and President of HLAM, with embezzlement and failure to register with the CFTC as a futures commission merchant. Furthermore, Jenkins allegedly misappropriated $748,827 of investors’ funds to trade gold and oil futures, stock index futures, and E-mini futures in his personal accounts. Jenkins also used misappropriated funds to pay for charges at department and discount stores and gasoline stations, and for cellular phone bills and airline tickets, according to the complaint.

The CFTC complaint, filed on November 20, 2012, alleges that HLAM’s Investment Agreement falsely represented to investors that their investment was solely for investing in E-mini futures and that investors’ funds would be immediately wired to a specific trading account. However, according to the complaint, most of investors’ funds were misappropriated by HLAM and Jenkins. To conceal and continue the fraud, Jenkins allegedly sent trading spreadsheets and statements to investors that falsely reported trades and profits earned and inflated the value of investments. The defendants’ fraudulent conduct resulted in a loss of approximately $1.3 million in investor funds, consisting of $1.16 million in misappropriated and embezzled funds and $140,000 in trading losses, according to the complaint.

In its continuing litigation, the CFTC seeks restitution, return by Jenkins and HLAM of all ill-gotten gains received, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act, as charged.

In a related criminal action by the Securities Division of the North Carolina, Department of the Secretary of State, Jenkins was indicted on August 20, 2012 on three counts of securities fraud in The General Court of Justice, State of North Carolina, Wake County, and is in custody awaiting trial.

The CFTC appreciates the assistance of the Securities Division of the North Carolina Department of the Secretary of State.

CFTC Division of Enforcement staff members responsible for this action are Xavier Romeu-Matta, Nathan B. Ploener, Christopher Giglio, Manal Sultan, Lenel Hickson, Stephen J. Obie, and Vincent A. McGonagle.