CFTC ANNOUNCES COMMODITY POOL FRAUDSTER SENT TO PRISON FOR 17 YEARS

FROM:  U.S. JUSTICE DEPARTMENT 

September 9, 2015

Commodity Pool Operator Sentenced to 17 Years’ Incarceration for Fraud

Washington, DC — Donovan Davis Jr., one of three Principal Defendants charged by the CFTC for the fraudulent operation of Capital Blu Management, LLC of Melbourne, Florida, was sentenced to 17 years in a federal prison on August 27, 2015.

Davis was convicted on May 14, 2015 of multiple counts of criminal conspiracy, mail fraud, wire fraud, and money laundering in connection with the operation of a fraudulent $17 million commodity pool. The two other Co-Defendants in the CFTC action, Blayne Davis and Damien Bromfield, earlier pleaded guilty to similar criminal charges. B. Davis was sentenced to 9 years in prison; Bromfield’s sentencing is scheduled for September 24.

CFTC Enforcement Director, Aitan Goelman, said “These sentences serve as a strong reminder that those who engage in fraud in the commodities markets face the very real possibility of criminal prosecution and jail time in addition to the civil sanctions sought by the CFTC.”

In 2011, the U.S. District Court for the Middle District of Florida found these same Defendants liable for civil violations of the Commodity Exchange Act and CFTC Regulations and ordered them to pay more than $7 million each in restitution and civil monetary penalties and permanently barred them from engaging in any commodity-related activity (see CFTC Press Release, Order, and Judgment 6054-11, June 15, 2011, and CFTC Press Release and Complaint 5643-09, April 7, 2009).

The CFTC subsequently provided material assistance to the U.S. Attorney’s office responsible for the criminal prosecution of these Defendants.

CFTC CHARGES MAN, COMPANIES WITH COMMODITY POOL FRAUD,

FROM:  U.S. COMMODITY FUTURES 

April 30, 2015

CFTC Charges North Carolina Resident Barry C. Taylor and His Companies with Commodity Pool Fraud in a Multi-Million Dollar Fraudulent Forex Scheme and with Registration Violations

Federal Court Enters Emergency Order Freezing Defendants’ Assets and Protecting Books and Records

Defendants’ Fraudulent Scheme Allegedly Solicited over $2.4 Million from Approximately 24 Members of the Public

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement Complaint against Barry C. Taylor of Franklin, North Carolina, charging him with operating a multi-million dollar fraudulent scheme through his firms, OTC Investments LLC and Forex Currency Trade Advisors, LLC (collectively, Defendants). On April 22, 2015, Judge Martin Reidinger of the U.S. District Court for the Western District of North Carolina, Asheville Division entered an emergency restraining Order freezing Defendants’ assets and prohibiting the destruction or concealment of their books and records. None of the Defendants has ever been registered with the CFTC, as is required.

The CFTC Complaint, filed under seal on April 21, 2015, alleges that from at least August 1, 2011 through the present, the Defendants engaged in a fraudulent scheme that solicited more than $2.4 million from approximately 24 members of the public in North Carolina and other states within the United States and in Canada to participate in a commodity pool that traded leveraged or margined retail off-exchange foreign currency (forex) contracts.

The Complaint further alleges that Taylor misappropriated pool participant funds for personal and other business uses, and to conceal his fraudulent scheme and misappropriation. Also, as alleged, Taylor issued or caused to be issued false account statements to one or more pool participants to cover up his fraudulent scheme.

Taylor, among other things, allegedly made material misrepresentations and omissions to commodity pool participants that 1) Defendants were engaged in profitable forex trading and 2) failed to disclose that Defendants traded only a portion of pool participant funds and misappropriated the remainder through a combination of personal expenditures and partial distributions of diminishing commodity pool funds to pool participants to lull and deceive them.

The Complaint also charges that the Defendants used pool participant funds to pay purported trading profits and supposedly returned pool participants’ principal in the manner of a Ponzi scheme.

In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the U.S. Attorney's Office for the Western District of North Carolina and the Federal Bureau of Investigation.

CFTC Division of Enforcement staff members responsible for this case are JonMarc P. Buffa, Peter M. Haas, Patricia A. Gomersall, Tashieka Taylor, and Paul G. Hayeck.

CFTC CHARGES COMPANY AND PRINCIPALS WITH POOL FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

March 31, 2015

CFTC Charges Maverick International, Inc. and its Principals Wesley Allen Brown and Edward Rubin with Pool Fraud and Other Violations

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a civil enforcement action in the U.S. District Court for the Middle District of Florida, charging Defendants Maverick International, Inc. and its principals, Wesley Allen Brown and Edward Rubin, with operating a fraudulent commodity pool and other violations of federal commodity laws. Maverick International, Inc. purportedly maintains offices in Wilmington, Delaware; however, its address is actually the address of a mail forwarding service. Brown currently resides in North Myrtle Beach, South Carolina, and Rubin resides in Winnabow, North Carolina.

The CFTC Complaint was filed under seal on March 23, 2015, and on March 26, 2015, U.S. District Court Judge Brian J. Davis issued an emergency Order freezing and preserving assets under Defendants’ control and prohibiting them from destroying documents or denying CFTC staff access to their books and records.  The Court scheduled a hearing for April 8, 2015, on the CFTC’s motion for a preliminary injunction.

The CFTC Complaint charges that, as early as June 18, 2008, Defendants solicited and accepted more than $2 million from members of the public to trade commodity futures contracts in a commodity pool. As alleged, the Defendants misappropriated all of the $2 million to pay their personal and business expenses, including rent, meals, and more than $200,000 in cash withdrawals.

The Complaint alleges that Brown used his position as an associate pastor at a Flagler Beach, Florida, church to solicit congregants to participate in the fraudulent scheme. Through in-person solicitations and the Defendants’ website (wealthnavigator.org), Brown represented to actual and potential participants that the Defendants profitably traded commodity futures and precious metals on behalf of participants. These representations were false, because Defendants misappropriated all of the participants’ funds, and no trading on behalf of participants took place, according to the Complaint.

In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.

The CFTC appreciates the assistance of the Office of the State Attorney for the Seventh Judicial District of Florida; the Florida Office of Financial Regulation; the Office of the U.S. Attorney for the Middle District of Florida; the North Carolina Department of the Secretary of State, Securities Division; the Sherriff’s Department, Brunswick County, North Carolina; and the City of Myrtle North Myrtle Beach, Department of Public Safety.

CFTC Division of Enforcement staff members responsible for this action are Timothy J. Mulreany, George Malas, and Paul Hayeck.

COURT ORDERS TEXAS COMPANY WITH OPERATING A FRAUDULENT COMMODITY POOL

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION  

April 6, 2015

Federal Court Orders Texas-based RFF GP, LLC, KGW Capital Management, LLC, and Kevin G. White to Pay over $7.5 Million for Operating a Fraudulent Commodity Pool

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Richard A. Schell of the U.S. District Court for the Eastern District of Texas entered a Consent Order for permanent injunction against Defendants RFF GP, LLC, KGW Capital Management, LLC, and Kevin G. White, all of The Woodlands, Texas. The Order, entered on March 30, 2015, requires the Defendants jointly to pay a $4,150,000 civil monetary penalty and restitution of $3,365,888. The Order also imposes permanent trading and registration bans against them.

The Order stems from a CFTC Complaint filed on July 9, 2013 (see CFTC Press Release 6644-13, July 12, 2013), charging the Defendants with fraud and misappropriation of pool participants’ funds while operating a fraudulent commodity pool, Revelation Forex Fund, LP. Defendants duped pool participants into investing in Revelation, a purported hedge fund and commodity pool, which Defendants established for the purpose of trading off-exchange foreign currency (forex), according to the Complaint.

The Order finds that the Defendants fraudulently solicited approximately $7.4 million from more than 20 pool participants. Of this amount, Defendants misappropriated approximately $1.7 million of pool participants’ funds. The Order also finds that White used these misappropriated pool participants’ funds for personal expenses, including a gym membership, retail purchases, meals, travel, and a dog training service, among other things. In making their solicitations through two websites and at a tradeshow presentation, Defendants fabricated Revelation’s performance and lied about White’s investment experience, according to the Order.

Related regulatory and criminal action

In a related regulatory action, the Securities and Exchange Commission filed a Complaint against White contemporaneously with the CFTC’s Complaint (SEC v. White, No. 4:13-cv-00383 (U.S. District Court for the Eastern District of Texas)). The U.S. District Court for the Eastern District of Texas entered interlocutory judgments against White and the other Defendants in this case on March 30, 2015.

In a related criminal action, on February 18, 2015, White was sentenced to 8 years in prison for mail fraud (United States v. White, Case No. 8:13-cr-00035-UA (U.S. District Court for the Eastern District of Texas)). (See CFTC Press Release 7127-15, February 26, 2015.)

The CFTC thanks the U.S. Securities and Exchange Commission’s Fort Worth, Texas, regional office, the U.S. Attorney’s Office for the Eastern District of Texas, the Federal Bureau of Investigation, Dallas Field Office, and the Nevada Office of the Attorney General for their assistance and cooperation on this matter.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this case are Harry E. Wedewer, Dmitriy Vilenskiy, John Einstman, and Paul G. Hayeck.

CFTC REVOKES REGISTRATIONS OF MAN AND COMPANY RELATING TO COMMODITY POOL FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION  

March 25, 2015

CFTC Revokes Registrations of John G. Wilkins and His Company, Altamont Global Partners LLC, Based on Federal Court’s Permanent Injunction Order and on Wilkins’s Related Criminal Conviction

Washington, DC—The U.S. Commodity Futures Trading Commission (CFTC) today announced the revocation of the registrations of Altamont Global Partners LLC (AGP) of Longwood, Florida and its owner, John G. Wilkins, formerly of Chuluota, Florida. AGP was registered with the CFTC as a Commodity Pool Operator, and Wilkins was registered as an Associated Person of AGP.

The CFTC initiated revocation proceedings against AGP and Wilkins on November 25, 2014 (see CFTC Press Release 7069-14, November 25, 2014). After AGP and Wilkins failed to participate in the proceedings, CFTC Judgment Officer Philip V. McGuire issued an Initial Decision on Default (see CFTC Docket No. SD 15-01) on February 23, 2015. The Judgment Officer found that AGP and Wilkins are subject to statutory disqualification from CFTC registration based on an Order for entry of default judgment and an amended Order of permanent injunction entered by the U.S. District Court for the Middle District of Florida that, among other things, (1) found AGP and Wilkins committed fraud by misappropriating commodity pool funds and by delivering false quarterly account statements to pool participants and (2) enjoined AGP and Wilkins from further violations of the anti-fraud provisions of the Commodity Exchange Act, as charged, and from trading or applying for registration with the CFTC (see CFTC Press Release 6869-14, February 28, 2014).

The Judgment Officer also found that Wilkins is subject to statutory disqualification based on his felony conviction for conspiracy to commit mail fraud and wire fraud in connection with these same activities (see United States v. Wilkins, No. 13-cr-181 (M.D. Fla. July 19, 2013)).

The Judgment Officer’s Initial Decision on Default became a final Order of the CFTC on March 25, 2015.

The CFTC thanks the National Futures Association for its assistance in this matter.

CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Peter Riggs, and Charles Marvine.

MAN WHO MISAPPROPRIATED COMMODITY POOL MONEY SENTENCED TO 8+ YEARS IN PRISON

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Kevin G. White Sentenced to over Eight Years in Federal Prison for $7.4 Million Commodity Pool Investment Scam

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Kevin G. White of The Woodlands, Texas, who orchestrated a $7.4 million commodity pool investment scam during which he misappropriated approximately $1.7 million from pool participants, was sentenced to over eight years in federal prison for charges related to his fraudulent misconduct. Earlier, on December 11, 2013, White pleaded guilty to committing mail fraud for his actions in connection with the scam.

The criminal charges arose from White’s solicitation fraud and misappropriation of pool participant funds, as charged in a Complaint filed by the CFTC on July 9, 2013 (see CFTC Press Release 6644-13, July 12, 2013), and a companion Complaint filed by the Securities and Exchange Commission. According to the CFTC’s Complaint, White, along two other Defendants in the CFTC’s action, RFF GP, LLC, and KGW Capital Management, LLC, duped pool participants into investing in Revelation Forex Fund, LP, a purported hedge fund and commodity pool. The CFTC’s Complaint further alleged that in making their solicitations through two websites and at a tradeshow presentation, White fabricated Revelation’s performance and lied about his investment experience. A proposed consent Order between the CFTC and White, RFF GP, and KGW Capital is currently pending in the U.S. District Court for the Eastern District of Texas.

Aitan Goelman, the CFTC’s Director of Enforcement, stated: “The sentence in this case should serve as a warning that those who willfully commit fraud in our markets face the very real possibility of a significant term of imprisonment. The CFTC will continue its vigilance in protecting commodities and derivatives investors from fraud and other forms of financial crime.”

The CFTC congratulates the U.S. Attorney’s Office for the Eastern District of Texas for its successful prosecution of this matter.

CFTC Division of Enforcement staff members responsible for the related CFTC case are Harry E. Wedewer, Dmitriy Vilenskiy, John Einstman, and Paul G. Hayeck.

COURT ORDERS $26 MILLION PENALTY AGAINST MAN, FIRM FOR COMMODITY POOL FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

March 3, 2015

Federal Court in New York Imposes a $26 Million Civil Monetary Penalty against Mark Evan Bloom and his Company, North Hills Management, LLC, for Commodity Pool Fraud

Bloom pleaded guilty in a parallel criminal proceeding and is currently awaiting sentencing

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge John G. Koeltl of the U.S. District Court for the Southern District of New York entered a Supplemental Consent Order requiring Defendants Mark Evan Bloom of Monmouth Beach, New Jersey, and his firm North Hills Management, LLC (NHM) jointly to pay a $26 million civil monetary penalty for operating a fraudulent commodity pool called North Hills LP (North Hills) and misappropriating customer funds (see CFTC Press Release and Complaint 5622-09, February 25, 2009). The Supplemental Consent Order resolves the CFTC’s case in its entirety.

Previously, on June 11, 2010, the court entered a Consent Order of permanent injunction against the Defendants (see the Consent Order under Related Links). In the Consent Order, the court found that Bloom and NHM misappropriated approximately $13 million from North Hills, which they operated from at least 2002 until February 2009. During this period, Bloom maintained a lavish lifestyle, including purchasing a luxury apartment in Manhattan for over $5 million. The Consent Order also found that Bloom and NHM concealed their misappropriation and made several other misrepresentations and material omissions to pool participants. For example, they failed to disclose that pool participants’ assets were invested contrary to their stated investment strategy, and they issued false statements concerning the nature and status of North Hills and participants’ interests in it. The Consent Order imposed a permanent injunction and permanent trading, solicitation, and registration bans against the Defendants.

In February 2009, Bloom was charged in a parallel criminal proceeding based on allegations that are similar to those in the CFTC’s Complaint (see United States v. Bloom, 1:09-cr-367-JGK (S.D.N.Y.)). On July 30, 2009, Bloom pleaded guilty to the charges and is currently awaiting sentencing. The plea agreement in Bloom’s criminal case requires him to pay restitution to investors in an amount to be determined by the court. For this reason, the Supplemental Consent Order in the CFTC’s case does not mandate restitution.

The CFTC appreciates the assistance of the Office of the U.S. Attorney for the Southern District of New York and the Securities and Exchange Commission.

CFTC Division of Enforcement staff members responsible for this case are Glenn Chernigoff, Kara Mucha, Alison Wilson, Rick Glaser, and Gretchen L. Lowe.

CFTC CHARGES MICHIGAN MAN WITH COMMODITY POOL FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

March 3, 2015

CFTC Charges Michigan Resident Jerry Stauffer with Commodity Pool Fraud and Other Violaions

Federal Court Issues Emergency Order Freezing Stauffer’s Assets and Protecting Books and Records

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Chief Judge Paul L. Maloney, of the U.S. District Court for the Western District of Michigan issued an emergency Order freezing and preserving the remaining pool participant assets under the control of Defendant Jerry Stauffer of Traverse City, Michigan. The Order, entered under seal on February 25, 2015, also prohibits Stauffer from destroying books and records and grants the CFTC immediate access to those records.

The Order arises out of a civil enforcement Complaint filed under seal by the CFTC on the same date, charging Stauffer with fraudulently soliciting at least $968,000 from members of the public to trade foreign exchange (forex) in a commodity pool, by among other things, guaranteeing pool participants a monthly return on their investment based on profits purportedly earned from forex trading. The CFTC Complaint further alleges that Stauffer prepared and distributed to pool participants false account statements showing huge profits, while at the same time he traded very little forex and diverted pool participants’ funds for his own use. In addition to fraud, the Complaint alleges that Stauffer illegally operated a commodity pool.

In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, the payment of appropriate monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

The CFTC appreciates the cooperation of the Civil Division of the U.S. Attorney’s Office for the Western District of Michigan and the Federal Bureau of Investigation in this matter.

CFTC Division Enforcement staff members responsible for this case are Eugenia Vroustouris, Michelle Bougas, Kathy Banar, Erica Bodin, and Rick Glaser.

* * * * *

CFTC’s Foreign Currency (Forex) Fraud and CFTC’s Commodity Pool Fraud Advisories

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.

The CFTC has also issued a Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in

CFTC ANNOUNCES JUDGEMENT AGAINST COMMODITY POOL OPERATORS

FROM:  U.S. COMMODITY FUTURES 
January 14, 2015

CFTC Obtains Judgment against Commodity Pool Operators TOTE Fund LLC and MJS Capital Management LLC, and their Principal, Michael J. Siegel, for Commodity Pool Fraud and Other Violations

Federal Court Orders Defendants to Pay More than $871,000 in Restitution, Disgorgement, and Civil Monetary Penalties

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Noel L. Hillman of the U.S. District Court for the District of New Jersey entered an Order of default judgment and permanent injunction against Defendants TOTE Fund LLC (TOTE) and MJS Capital Management LLC (MJS), two Commodity Pool Operators, and their sole principal Michael J. Siegel of Northfield, New Jersey.

The court’s Order requires Siegel and MJS, jointly and severally, to pay restitution of $104,684.47, disgorgement of $86,503.36, and a civil monetary of $259,510.08. Siegel and TOTE are also jointly and severally required to pay disgorgement of $105,185.89 and a civil monetary penalty of $315,557.67. The Order further imposes permanent trading and registration bans against all Defendants. The Order, entered on December 30, 2014, stems from a CFTC Complaint filed on September 27, 2013 (see CFTC Press Release 6723-13).

The Order finds that Defendants violated the Commodity Exchange Act by misappropriating funds totaling approximately $191,689 from Monarch Futures Fund LLC (Monarch) and QEP Futures Fund LLC (QEP), two commodity pools operated by TOTE and MJS, respectively, by withdrawing money from the pools for non-pool expenses and taking fees to which they were not entitled. According to the Order, despite earning incentive, management, and administrative fees of $319,909 based on his trading, Siegel transferred approximately $511,598 from bank accounts in the names of Monarch, QEP, and TOTE to his personal bank accounts, to a credit card account, and to at least one individual and used some of these funds to pay personal expenses.

The Order further finds that MJS and Siegel misappropriated funds by failing to return funds to at least two pool participants who sought to withdraw their funds from QEP. Also, TOTE, acting through Siegel, failed to provide Monarch pool participants with copies of monthly statements received by TOTE from Futures Commission Merchants, as required by a CFTC Regulation, the Order finds.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC Division of Enforcement staff members responsible for this case are Kara L. Mucha, James A. Garcia, Michael W. Solinsky, Charles D. Marvine, and Gretchen L. Lowe.

CFTC ANNOUNCES DEFAULT ORDER ENTERED IN CASE INVOLVING THE VASQUEZ POOL

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court Orders North Carolina Resident Edwin A. Vasquez and His Company, Vasquez Global Investments, LLC, to Pay over $1.3 Million for Commodity Pool Fraud

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Martin Reidinger of the U.S. District Court for the Western District of North Carolina entered an Order of Default Judgment against Defendants Edwin A. Vasquez of Arden, North Carolina, and his company, Vasquez Global Investments, LLC (VGI), for defrauding participants in a commodity pool commonly known as the Vasquez pool.

The Order, entered on December 30, 2014, requires Vasquez and VGI, joint and severally, to pay $331,556 in restitution; requires Vasquez and VGI, joint and severally, to pay a civil monetary penalty of $994,668, and imposes permanent trading, solicitation, and registration bans against all Defendants.

The Court’s Order stems from a CFTC Complaint filed on July 30, 2014, that charged Vasquez and VGI with misappropriation, solicitation fraud, and issuing false statements in connection with the operation of an unregistered commodity trading pool (see CFTC Press Release 6974-14). The Complaint also charged Vasquez and VGI with commingling pool participant funds and registration violations.

The Order finds that, beginning in August 2011, Vasquez, acting individually and through VGI, defrauded and deceived at least 19 participants who invested at least $583,491 in the Vasquez pool. The Order further finds that Vasquez told prospective pool participants that he was a successful trader and that the VGI pool was a “no risk” investment. In fact, the Order finds that of the $583,491 solicited and accepted from pool participants, Vasquez and VGI lost $65,374 trading commodity futures and misappropriated $331,556 by using those funds to pay for VGI’s operating costs and for Vasquez’s personal expenses, including travel, restaurants, and retail purchases. During that time, according to the Order, 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.

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

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

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

COURT ORDERS $44 MILLION IN SANCTIONS FOR COMMODITY POOL FRAUD AND MISAPPROPRIATION

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court in Utah Imposes over $44 Million in Sanctions against Robert Andres and His Company, Winsome Investment Trust, and Robert Holloway and His Company, US Ventures, for Commodity Pool Fraud and Misappropriation

The U.S. Attorney’s Office for the District of Utah Filed Parallel Criminal Actions against Andres and Holloway

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order requiring Defendants Robert J. Andres of Houston, Texas, his company, Winsome Investment Trust (Winsome), Robert L. Holloway of San Diego, California, and his company US Ventures LC (USV), to pay a civil monetary penalty of $32,370,000 and restitution for defrauded customers totaling $12 million. The court’s Order also imposes permanent trading and registration bans against Andres, Winsome, Holloway, and USV and prohibits them from violating provisions of the Commodity Exchange Act, as charged.

The default judgment Order stems from a CFTC civil enforcement action filed on January 24, 2011, that charged the Defendants with fraud in the operation of a commodity futures pool (see CFTC Press Release 5976-11). The Order (see Related Link) was entered by the Honorable Bruce S. Jenkins of the U.S. District Court for the District of Utah on June 6, 2014.

Specifically, the Order finds that:

• From at least May 2005 through November 2008, Andres and Winsome fraudulently solicited and accepted at least $50.2 million from at least 243 individuals to invest in a commodity futures pool operated by Holloway and USV.  In their solicitations, Andres and Winsome falsely claimed a successful track record and guaranteed the return of participants’ principal and profits; however, contrary to Andres’s and Winsome’s claims of consistently profitable trading, USV’s and Holloway’s futures trading was not successful, sustaining overall net losses of approximately $10.7 million.

• The Defendants allegedly traded only a portion of Winsome’s pool’s funds and misappropriated the majority of participant funds to pay purported “profits” to pool participants in a manner akin to a Ponzi scheme, to provide money to Andres’ wife, and to invest in various unrelated and undisclosed businesses, including using $4.2 million of participant funds to purchase an aerospace consulting business.

• Holloway used participant funds to pay personal and unrelated business expenses, and to pay for houses, cars, home furnishings, jewelry, lawn and maid services, and credit card bills in the name of his wife.  Holloway also used participant funds to finance his wife’s eBay business, Alcoy Enterprises, LLC.

• Andres and Holloway attempted to conceal the fraud by directing employees to falsify participants’ account records and by providing e-mailed account statements to participants falsely representing that Holloway profitably traded pool funds -– sustaining virtually no losses during the relevant period.

In a parallel criminal actions brought by the U.S. Attorney’s Office for the District of Utah, Andres was indicted on five counts of wire fraud, and Holloway was indicted on four counts of wire fraud and one count of making and filing a false income tax return. Holloway’s trial date is currently set for July 8, 2014. Andres pleaded guilty to one count of wire fraud, and he is scheduled to be sentenced on August 20, 2014.

The CFTC appreciates the assistance of the Comisión Nacional del Mercado de Valores (Spain), the Dubai Financial Services Authority, and the British Virgin Islands Financial Services Commission.

CFTC Division of Enforcement staff members responsible for this case are Alan Edelman, Kevin S. Webb, Michelle S. Bougas, Heather Johnson, Kara Mucha, James H. Holl III, and Gretchen L. Lowe.

TWO PRINCIPALS AND COMPANY CHARGED WITH COMMODITY POOL FRAUD BY CFTC

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges New York-Based SK Madison Commodities, LLC and its principals, Michael James Seward and Yan Kaziyev, with Commodity Pool Fraud and Other Violations

Federal Court Issues Emergency Order Freezing Assets and Protecting Books and Records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on March 24, 2014, Judge Sidney Stein of the U.S. District Court for the Southern District of New York (Manhattan) issued an emergency Order freezing and preserving the remaining pool participant assets under the control of Michael James Seward, Yan Kaziyev, and their company SK Madison Commodities, LLC (SKMC), a Commodity Pool Operator based in New York City. The Order also freezes assets controlled by a successor company, SK Madison, LLC, prohibits Seward, Kaziyev, and SKMC from destroying books and records, and allows the CFTC immediate access to those records.

This emergency Order is part of a CFTC enforcement action filed on March 24, 2014. The CFTC Complaint alleges that, from as early as October 2010, Seward and Kaziyev, by and through SKMC (collectively, Defendants), fraudulently solicited more than $1.3 million from members of the public to trade futures in a commodity pool by, among other things, misrepresenting their trading practices and historical trading returns. The Complaint further alleges that the Defendants prepared and distributed to pool participants false account statements and performance reports showing huge profits, while at the same time Defendants were losing money trading futures and diverting large amounts of pool participants’ funds for Defendants’ own use. In addition to fraud, the Complaint alleges that the Defendants committed certain registration violations.

In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, the payment of appropriate civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

COURT ORDERS DEFENDANTS TO PAY $16 MILLION IN CFTC FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Obtains Default Judgment against Altamont Global Partners LLC and John G. Wilkins for Commodity Pool Fraud, Misappropriation, and Making False Statements to National Futures Association

U.S. District Court in Florida Orders Defendants to Pay More than $15.8 Million in CFTC Anti-Fraud Action

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida entered a default judgment and permanent injunction Order against Defendants Altamont Global Partners LLC (AGP) of Longwood, Florida, and its owner, John G. Wilkins, formerly of Chuluota, Florida. The Order requires AGP to pay $10,969,843 in disgorgement and Wilkins to pay $1,214,902 in disgorgement and a $3,644,706 civil monetary penalty. The Order also imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act and a CFTC regulation, as charged.

The court’s Order, entered on February 20, 2014, stems from a CFTC Complaint filed on July 16, 2012 against AGP and Wilkins, as well as Defendants Philip Leon and Paul Rangel (see CFTC Press Release 6315-12). The Order confirmed and adopted U.S. Magistrate Judge Thomas B. Smith’s Report and Recommendation of January 31, 2014, which stated that from approximately March 2009 to at least June 22, 2012, AGP and Wilkins operated a fraudulent scheme that solicited at least $13 million from approximately 198 commodity pool participants to trade, among other things, commodity futures contracts, options on futures, and off-exchange foreign currency contracts.

The Order states that AGP and Wilkins, along with the other Defendants, misappropriated more than $5.2 million of pool participants’ funds in “loans” and “advances” to Defendants, which were sham transactions designed to disguise Defendants’ misappropriation, and issued false statements to pool participants regarding the profitability and value of their accounts. In addition, the Order states that AGP and Wilkins provided false information and documentation to the National Futures Association (NFA).

CFTC Previously Settled with Defendants Leon and Rangel

Previously, on December 17, 2013, the court entered consent Orders of permanent injunction against Defendants Leon and Rangel, requiring them to pay a combined total of over $8 million in disgorgement and civil monetary penalties, among other sanctions, to settle the CFTC action (see CFTC Press Release 6797-13).

With the entry of the Order against AGP and Wilkins, the CFTC’s litigation is concluded; however, the court-appointed receiver, Mark Silverio, continues his efforts to marshal and distribute Defendants’ assets to their fraud victims.

A Related Criminal Action

In a related criminal action, on August 22, 2013, Wilkins pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud (see United States v. Wilkins, No. 13-cr-181 (M.D. Fla. July 19, 2013)). Wilkins was sentenced to 108 months in federal prison and ordered to pay $17,042,026.89 in restitution, jointly and severally with defendant Leon, who received the same prison sentence.

The CFTC thanks the NFA for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Peter Riggs, Stephen Turley, Charles Marvine, Rick Glaser, and Richard Wagner.

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CFTC’s Commodity Pool Fraud Advisory

COURT ORDERS COMPANY AND PRINCIPALS TO PAY OVER $22 MILLION FOR ROLES IN COMMODITY POOL FRAUD SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
December 4, 2013

Federal Court Orders Defendants Arista LLC, Abdul Sultan Walji, and Reniero Francisco, All of Southern California, to Pay over $22 Million in Restitution and Fines for Commodity Pool Fraud and Making False Statements to the CFTC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York entered a consent judgment and permanent injunction Order against Arista LLC (Arista), a registered Commodity Pool Operator with its principal place of business in Newport Coast, California, and against Arista’s principals, Abdul Sultan Walji (a/k/a Abdul Sultan Valji) of San Juan Capistrano, California, and Reniero Francisco of Coastal Oak, California, for carrying out a fraudulent scheme to misappropriate millions of dollars from investors in commodity futures and options, making false statements to the CFTC, and filing false quarterly reports with the National Futures Association (NFA).

The Order, entered on December 3, 2013, requires the Defendants to pay more than $8.25 million in restitution for the losses of defrauded investors.  In addition, the Order imposes civil monetary penalties of $6.45 million on Walji, $5.925 million on Francisco, and $1.54 million on Arista.  The Order further imposes permanent trading and registration bans on the Defendants and prohibits them from violating provisions of the Commodity Exchange Act (CEA) and a CFTC regulation, as charged.

The Court’s Order stems from a CFTC Complaint filed on December 12, 2012 and amended on May 28, 2013 (Complaint), which charged the Defendants with violating anti-fraud provisions of the CEA, making false statements to the CFTC, and filing false reports with the NFA (see CFTC Press Releases 6460-12 and 6600-13).

In the Order, the Defendants admit to all of the Order’s findings and all of the allegations in the CFTC’s Complaint.  The Order finds that, from at least February 2010 through January 2012, the Defendants collected funds from 39 investors totaling more than $9.5 million, of which the Defendants paid themselves $4.125 million in purported fees and lost more than $4.8 million trading in futures and options.  The Defendants also provided false quarterly statements to the investors, violated the CEA’s registration requirements, and, after subsequently registering, provided false reports to the NFA.  Further, in September 2011, the Defendants misrepresented certain account balances, asset values, and fee calculations in a letter sent in response to requests for information from the CFTC’s Division of Enforcement.  The Order enforces the false statements provision of the CEA, which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

In a related criminal proceeding, Walji and Francisco each pled guilty to conspiracy and fraud charges and were sentenced, respectively, to 151 months and 97 months of imprisonment.

The CFTC appreciates the assistance of the U.S. Department of Justice, the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the NFA.

CFTC Division of Enforcement staff members responsible for this case are Michael P. Geiser, Laura A. Martin, Douglas K. Yatter, Philip D. Rix, Lenel Hickson, and Manal M. Sultan.

CFTC FILES ENFORCEMENT ACTION IN REGARDS TO A COMMODITY POOL FRAUD SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges TOTE Fund LLC, MJS Capital Management LLC and their Principal, Michael J. Siegel with Commodity Pool Fraud

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that it filed a civil enforcement action in the U.S. District Court for the District of New Jersey, charging two California firms, TOTE Fund LLC (TOTE) and MJS Capital Management LLC (MJS), and their principal, Michael J. Siegel of Northfield, New Jersey, with misappropriating funds in connection with two commodity pools.

The CFTC’s Complaint, filed on September 27, 2013, alleges that, from August 2007 through at least October 2010, TOTE, MJS, and Siegel, operated two commodity pools, the Monarch Futures Fund LLC (Monarch) and the QEP Futures Fund LLC (QEP). Pool participants placed approximately $1.375 million in the QEP and Monarch pools.

The Complaint further alleges that, from at least January 2008 through at least October 2010, the Defendants misappropriated funds totaling approximately $191,689 from Monarch and QEP pool participants by withdrawing money from the pools for non-pool expenses and taking fees to which they were not entitled. As alleged in the Complaint, despite earning incentive, management, and administrative fees of approximately $319,909 based on his trading for Monarch and QEP, Siegel transferred approximately $511,598 from bank accounts in the names of Monarch, QEP, and TOTE to his personal bank accounts, to a credit card account, and to at least one individual. Siegel used some of these funds to pay personal expenses, according to the Complaint, and MJS and Siegel also misappropriated funds by failing to return funds to at least two pool participants who sought to withdraw their funds from QEP.

As further alleged, TOTE, acting through Siegel, also failed to provide Monarch pool participants with copies of monthly statements received by TOTE from Futures Commission Merchants, as required by CFTC Regulation.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, James Garcia, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.

COURT ORDERS COMPANY, EMPLOYEES AND AGENTS TO PAY RESTITUTION AND PENALTIES IN POOL FRAUD CASE

FROM: COMMODITY FUTURES TRADING COMMISSION

Federal Court Orders Alpha Trade Group S.A. and its Employees and Agents to Pay Combined Restitution and Penalties of $5.779 Million for Defrauding Pool Participants


Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on June 3, 2013, Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida entered an Amended Order entering final judgment (Order) against Defendants Alpha Trade Group, S.A. (ATG), Jose Cecilio Martinez Beltran (Martinez), Welinton Bautista Castillo (Bautista), Yehodiz Padua Valentin (Padua), Maria Alvarez Gutierrez (Gutierrez), and Maria Asela Rodriguez (Rodriguez), all of Orlando, Florida, for their involvement in a fraudulent off-exchange foreign currency (forex) and commodity futures scheme involving two pools, Orsa Investment Group, L.L.C. and Online Marketing Solutions. The Order finds that certain Defendants solicited customers, accepted their funds into the two pools and then failed to return more than $1,461,000, primarily from residents in Florida, California, and Puerto Rico. Moreover, the Order finds that all of the Defendants misappropriated customer funds.

The Order requires ATG, Martinez, and Bautista to pay, jointly and severally, $1,461,500 in restitution, and each to pay a $980,000 civil monetary penalty. The Order requires Padua, Gutierrez and Rodriguez to pay restitution in the amounts of $10,383, $82,750, and $49,079.37, respectively, as well as civil monetary penalties in the amounts of $840,000, $248,250, and $147,238.11, respectively. The Order also imposes permanent trading and registration bans against all of these defendants, and prohibits them from violating the Commodity Exchange Act, as charged.

The Order stems from a CFTC Complaint filed on September 27, 2011, charging ATG, Martinez, Bautista and Padua with solicitation fraud, issuing false account statements, and misappropriating pool participant funds, in connection with both futures and forex, and failing to register with the Commission in connection with futures activities, and also charging Gutierrez and Rodriguez with misappropriating pool participant funds. (See CFTC Press Release 6115-11; CFTC v. Alpha Trade Group S.A., et al., Case No. 6:11-cv-01584-GAP-DAB.)


The CFTC acknowledges the assistance of U.S. Immigration and Customs Enforcement, Department of Homeland Security, as well as the U.S. Attorney’s Office for the Middle District of Florida during the investigation of this matter. The CFTC also acknowledges the assistance provided by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the Ontario Securities Commission (OSC), and Spain’s Comisión Nacional del Mercado de Valores (CNMV) during the investigation.

CFTC Division of Enforcement staff members responsible for this case are Kim Bruno, Amanda Harding, Michael Loconte, Erica Bodin, Kathleen Banar, Rick Glaser, and Richard Wagner.

MEN AND COMPANIES TO PAY OVER $1.8 MILLION FOR COMMODITY POOL FRAUD

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court Orders Spencer Montgomery, Brian Reynolds, Arjent Capital Markets LLC, and Chicago Trading Managers LLC to Pay More than $1.8 Million for Commodity Pool Fraud

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York entered a consent judgment and permanent injunction Order against Defendants Spencer Montgomery and Brian Reynolds, and a default judgment and permanent injunction Order against Defendants Arjent Capital Markets LLC (Arjent) and Chicago Trading Managers LLC (CT Managers), for defrauding pool participants by knowingly issuing or causing to be issued false account statements for commodity pools. The Orders require Montgomery and Reynolds each to pay a $140,000 civil monetary penalty, Arjent and CT Managers jointly to pay a $1.4 million civil monetary penalty, and Arjent to pay an additional $140,000 civil monetary penalty. The Orders further impose permanent trading and registration bans on all the Defendants and prohibit them from violating the Commodity Exchange Act (CEA), as charged.

The court’s Orders, entered March 19, 2013 and May 15, 2013, respectively, stem from a CFTC Complaint filed on March 13, 2012, that charged the Defendants with violating the CEA’s anti-fraud provisions.

The Orders find that from at least June 2008 through at least November 2009, Arjent, CT Managers, Montgomery, and Reynolds defrauded commodity pool investors, who had invested approximately $10.5 million. CT Managers, Montgomery, and Reynolds knowingly issued and/or causing to be issued false account statements for two commodity pools, which Arjent aided and abetted, while Arjent, Montgomery, and Reynolds knowingly issued or caused to be issued a false account statement for a third commodity pool, the Orders find. Additionally, the Orders find that the Defendants knew that certain debits were being held in the same account as the commodity pools’ assets and that those debits depleted the commodity pools’ assets. Nonetheless, the Orders find that Arjent, CT Managers, Montgomery, and Reynolds issued or caused to be issued account statements that did not reflect the dilution of the commodity pools’ assets by these debits.

The CFTC thanks the National Futures Association, the Chicago Board Options Exchange, the U.S. Securities and Exchange Commission, and the Financial Services Authority (UK) for their assistance.

CFTC staff members responsible for this case are Laura Martin, Janine Gargiulo, Candice Aloisi, Michael Geiser, Judith Slowly, David Acevedo, Manal Sultan, Lenel Hickson, Lisa Hazel, Annette Vitale, Ronald Carletta, Stephen Obie, and Vincent McGonagle.

TEXAS MAN AND FIRM ORDERED TO PAY OVER $2.5 MILLION IN OIL FUTURES COMMODITY POOL FRUAD CASE

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Court finds that defendants fraudulently solicited and accepted over $1.4 million from customers to trade crude oil futures contracts in a commodity pool

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court order against defendants Christopher D. Daley and his firm, TC Credit Service, LLC doing business as Del-Mair Group, LLC (DMG), both of Houston, Texas, requiring Daley and DMG to jointly pay $654,183 in restitution to defrauded investors and a civil monetary penalty of $1,995,000. The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act and CFTC regulations, as charged.

The order of default judgment, entered by Judge Keith P. Ellison of the U.S. District Court for the Southern District of Texas, stems from a CFTC enforcement action filed on June 18, 2012, against Daley and DMG, charging them with solicitation fraud and misappropriation in the operation of a commodity pool scheme (see CFTC Press Release 6301-12, July 11, 2012, as a Related Link). Daley was owner and sole employee of DMG, and neither defendant has ever been registered with the CFTC.

The order finds that Daley fraudulently solicited and accepted over $1.4 million from customers to participate in a commodity pool to trade crude oil futures contracts. In soliciting customers, Daley represented that DMG would generate monthly returns of 20 percent and distributed account opening documents that guaranteed 20 percent to 60 percent monthly returns on deposits, the order finds, noting that these representations were false. In reality, Daley’s trading accounts sustained net losses each month. The order also finds that the defendants misappropriated customers’ funds by using those funds to pay other customers’ purported returns, to pay for Daley’s personal expenses, and to trade in Daley’s personal commodity interest accounts. The defendants distributed false account statements to pool participants reporting returns supposedly earned as a result of Daley’s futures trading and acted in capacities requiring registration with the CFTC, the order finds.

CFTC Division of Enforcement staff responsible for this case are Eugene Smith, Patricia Gomersall, Antoinette Chance, Christine Ryall, Paul Hayeck, and Joan Manley.

CFTC SEEKING TO REVOKE REGISTRATIONS FOR COMPANIES AND OWNER

FROM: COMMODITY FUTURES TRADING COMMISSION

CFTC Seeks to Revoke Registrations of Linda Faye Harris and her companies, CDH Forex Investments, LLC and CDH Global Holdings, LLC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a notice of intent to revoke the registrations of Linda Faye Harris, CDH Forex Investments, LLC (CDH Forex) and CDH Global Holdings, LLC (CDH Global), all of Flower Mound, Texas. CDH Forex is a registered Commodity Pool Operator and Commodity Trading Advisor; CDH Global is a registered Commodity Trading Advisor; and Harris is registered as an Associated Person and is the sole principal of CDH Forex. Harris was an Associated Person and principal of CDH Global.

The notice alleges that Harris, CDH Forex, and CDH Global are subject to statutory disqualification from CFTC registration based on an order of default judgment and permanent injunction entered by the U.S. District Court for the Northern District of Texas on June 12, 2012 (see CFTC News Release 6286-12 June 21, 2012). The order prohibits defendants from committing further fraud, among other violations. At the hearing held on June 12, 2012, Harris appeared and conceded all allegations in the complaint of violations of the Commodity Exchange Act, but contested only the amount of restitution and civil monetary penalty. The court found none of Harris’ arguments credible and entered the order as submitted by the CFTC. The order contains findings of fact and conclusions of law, which find, in relevant part, 1) that Harris fraudulently solicited at least $2.2 million from customers, out of which total trading losses and misappropriated funds equaled at least $1,361,897, and 2) made material false statements to pool participants. The order also finds that Harris provided false, fictitious, or fraudulent statements to the National Futures Association (NFA), including falsified trading account statements and falsified bank statements, to hide the ongoing fraud from NFA.

CFTC Division of Enforcement staff members responsible for this action are Nathan B. Ploener, Manal M. Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.