FEDERAL COURT ORDERS CONVICTED COMMODITY POOL FRAUDSTER TO PAY $2.1 MILLION PENALTY

A lot of millionaires make their money the old fashion way: they steal it. The following is an excerpt from the CFTC website:

"July 13, 2011

Federal Court in Illinois Orders Joseph A. Dawson to Pay $2.1 Million Penalty for Commodity Pool Fraud and Misappropriation
Dawson sentenced to 54 months of imprisonment and ordered to pay $3.3 million in restitution in criminal proceeding for the same scheme.
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on July 5, 2011, Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois entered a supplemental consent order imposing a $2.1 million civil monetary penalty on Joseph A. Dawson of Fox Lake, Ill. The CFTC charged Dawson and his company, Dawson Trading LLC (Dawson Trading) of McHenry, Ill., with fraudulent solicitation and misappropriation of customer funds in a commodity pool scheme (see CFTC Press Release 5860-10, July 26, 2010).

Previously, on April 26, 2011, the court entered a consent order of permanent injunction against Dawson finding that he violated the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged. The consent order found that, between at least February 2005 and December 2009, Dawson and his company misappropriated approximately $2.1 million of Dawson Trading participant funds. The order found that Dawson used the misappropriated funds for personal purchases and expenses, including a down payment on a personal residence, mortgage payments, an in-ground swimming pool, landscaping, furniture, restaurant bills, movie tickets, and car payments. The order permanently barred Dawson from any commodity-related activity, including trading and registering or seeking exemption from CFTC registration, and from violating the CEA’s anti-fraud provisions. The order left the issues of any restitution and a civil monetary penalty to be resolved later.

On July 11, 2011, Judge Kendall entered a default judgment and permanent injunction order against Dawson Trading, finding that the company violated the same CEA anti-fraud provisions as Dawson, was liable for Dawson’s violations as his principal, failed to register as a commodity pool operator as required by CFTC regulations, and unlawfully permitted Dawson to act as its agent without being lawfully registered as an associated person of the company. The order requires Dawson Trading to pay a $2.1 million civil monetary penalty and permanently prohibits it from engaging in any commodity-related activity, including trading and registering with the CFTC.

In a related criminal proceeding in March 2011, Dawson was sentenced to 54 months imprisonment and required to pay $3.3 million in restitution to pool participants (U.S. v. Dawson, 09-cr-1037-1 (N.D. Ill.)).

The CFTC thanks the U.S. Attorney’s Office for the Northern District of Illinois, the Federal Bureau of Investigation, and the Securities and Exchange Commission for their assistance.

CFTC Division of Enforcement staff responsible for this action are Stephanie Reinhart, William Janulis, Ken Hampton, Scott Williamson, Rosemary Hollinger, and Richard Wagner."

After reading the above story I'll be wondering about how every neighbor made the money they used to put in their new pool.

SEC CHARGES TWO SOUTH FLORIDA COMPANIES WITH COMMODITIES FRAUD

The following case involves the hot topic of commodities. Commodity price ran up for several months but have been softening recently. Fraud in securities, commodities, real estate etc., usually is not looked into by the public while prices are falling. It is more usual that it is when prices fall that people start taking an interest in any possible fraud cases. The case below is an excerpt from the SEC web site:

April 21, 2011
‘The Securities and Exchange Commission obtained the appointment of a receiver over two South Florida companies and permanent injunctions on April 1, 2011 and April 8, 2011, respectively, for conducting a fraudulent $27.5 million investment scheme with funds raised by offering and selling unregistered securities to investors nationwide from January 2010 until March 2011.
In its Complaint the SEC alleges that Commodities Online, LLC (“Commodities Online”) and Commodities Online Management, LLC (“Commodities Management,” and together, the “Defendants”), beginning in January 2010, represented to investors that Commodities Online was in the business of arranging and funding commodities contracts. The SEC further alleges that the Defendants represented to potential investors that Commodities Online purchased commodities only after arranging for a buyer and a seller. Defendants claimed that Commodities Online made money based on the price spread and told investors they would “earn 5% or more per month without price speculation.” Commodities Online sold participation units in such contracts and claimed to have invested at least $24 million raised from investors. Commodities Online also claimed to have raised at least $2.4 million from investors who invested in membership units in Commodities Online. Neither the participation units nor the membership units were registered with the Commission.
In its Complaint, the Commission alleges that Defendants made numerous material misrepresentations in connection with the offering and sale of the participation units and membership units. Although Commodities Online claimed on its website that, as of March 14, 2011, it had offered and paid a total of 48 contracts and that all completed contracts had returned the promised level of profits to the investors, the Commission alleges that in fact all completed contracts did not return the promised level of profit to investors and Commodities Online performed only a limited percentage of the commodities transactions it promised investors. Instead, according to the Complaint, Commodities Online dissipated investor funds by sending millions of dollars to companies controlled by its co-founder and former managing member and to one of its vice presidents. Further, Commodities Online held itself out as providing a viable, profitable investment vehicle to prospective investors, but, the Commission alleges, in reality it did not earn any net profits from entities it dealt with in connection with the purported commodities contracts. In addition, Commodities Online failed to disclose to prospective investors that its co-founder and former managing member is a convicted felon and failed to disclose that a vice president pled guilty to federal bank fraud and other felonies and is currently serving a term of supervised release.
The SEC’s Complaint charges Commodities Online and Commodities Management with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Defendants consented to the appointment of a Receiver, to the entry of permanent injunctions against future violations of the provisions of the securities laws with which they were charged, and to disgorgement, prejudgment interest, and civil money penalties in amounts to be determined by the Court.
The Court appointed David Mandel, an attorney with the law firm of Mandel & Mandel LLP of Miami, Florida, as a receiver over the Defendants. Among other things, the receiver is responsible for marshaling and safeguarding assets held by these entities.”