COURT ORDERS ARIZONA MAN TO PAY OVER $1.2 MILLION STEMMING FROM SOLICITATION FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court Orders Arizona Resident Ray Thomas Brown to Pay over $1.2 Million for Solicitation Fraud and Misappropriation in Operating Two Commodity Scams

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Frederick J. Martone of the U.S. District Court for the District of Arizona granted the CFTC’s motion for summary judgment and entered an Order of permanent injunction against Defendant Ray Thomas Brown, of Phoenix, Arizona. The Order imposes permanent trading and registration bans against Brown and requires him to pay restitution and disgorgement totaling $1,131,941.98 and a civil monetary penalty of $140,000.

The Order stems from a CFTC Complaint filed on November 26, 2012 (see CFTC Press Release 6448-12, December 6, 2012), charging Brown with fraud, misappropriation, and registration violations in operating two scams, one involving fraud while acting as a Commodity Pool Operator (CPO) and the other involving fraud while acting as a Commodity Trading Advisor (CTA). Brown duped customers into sending at least $1.2 million to bank and trading accounts under his control, according to the Complaint. The CFTC Complaint also charged Brown with illegally operating as an unregistered CPO and CTA.

The Order finds that Brown fraudulently solicited approximately $1,163,519 from more than 200 individuals. Of that amount, Brown deposited only approximately $86,000 into commodity pool trading accounts, which was promptly lost in trading. The Order also finds that Brown used the bulk of the funds he solicited on personal expenses and to further his fraudulent scheme. In making his solicitations, Brown lied about his background, fabricated his past and present investment performance, disseminated false account statements, and failed to disclose that he was not registered with the CFTC in any capacity, according to the Order.

A Related Criminal Action

In a related criminal action, Brown pleaded guilty on May 7, 2013, to wire fraud. Brown is currently awaiting sentencing (United States v. Ray Thomas Brown, Case No. 8:13-cr-00035-UA (United States District Court for the Central District of California)).

The CFTC thanks the United States Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Black Mountain Precinct of the Phoenix Police Department, and the Arizona Corporation Commission for their assistance and cooperation on this matter.

CFTC Division of Enforcement staff members responsible for this case are Dmitriy Vilenskiy, Jonathan Robell, Richard Foelber, Paul Hayeck, and Joan Manley.

"CFTC REVOKES REGISTRATIONS OF CHICAGO TRADING MANAGERS LLC"

FROM:  COMMODITY FUTURES 
February 3, 2014
CFTC Revokes the Registrations of Chicago Trading Managers LLC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) revoked the registrations of Chicago Trading Managers LLC (CT Managers). CT Managers had been registered with the CFTC as a Commodity Pool Operator and Commodity Trading Advisor.

On December 27, 2013, CFTC Judgment Officer Philip V. McGuire issued a Decision against CT Managers, finding that it was statutorily disqualified from CFTC registration based on a default judgment and permanent injunction Order entered by the U.S. District Court for the Southern District of New York on May 15, 2013 (see CFTC News Release 6589-13, May 16, 2013). That injunction prohibits CT Managers from, among other things, committing further fraud; entering into any regulated commodity contract transactions for any account in which it has a direct or indirect interest; controlling or directing the trading of any regulated commodity contract account; and soliciting or receiving or accepting any funds for the purpose of purchasing or selling any regulated commodity contract.

Additionally, the default judgment found that on at least 10 occasions CT Managers issued, or caused to be issued, statements to pool participants that fraudulently inflated the net asset value for pools and found that CT Managers, by engaging in that conduct, committed fraud in violation of the Commodity Exchange Act.

Additionally, the default judgment ordered CT Managers to pay a civil monetary penalty of $1.4 million jointly and severally with another Defendant.

The CFTC thanks the National Futures Association for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Lenel Hickson and Manal M. Sultan.

COMMODITY POOL OPERATOR CHARGED WITH ALLEGED FRAUD BY CFTC

The following excerpt is from the CFTC website:

“Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a complaint in federal court in North Carolina, charging defendant Mitchell Brian Huffman of Charlotte, N.C., with operating a fraudulent commodity pool scheme that defrauded participants of more than $3.2 million in connection with exchange-traded commodity futures contracts. Huffman has never been registered with the CFTC.

From at least August 2006 to March 11, 2011, Huffman allegedly solicited prospective and actual pool participants, mainly family and friends, via in-person and direct telephone solicitations, to buy and sell exchange-traded commodity futures contracts on their behalf. During the period, Huffman allegedly fraudulently solicited and accepted approximately $3.2 million from at least 30 participants throughout the United States. In doing so, he also allegedly misled prospective and actual participants about the likelihood of profits and the substantial risks involved in such investments.

According to the CFTC complaint filed on February 7, 2012, Huffman entered into “sponsorship agreements” with pool participants. Huffman told pool participants that he would trade commodity futures contracts on their behalf. Huffman allegedly said that he utilized a “proprietary trading program” that generated “profits” of 100 percent to 150 percent per year and claimed that he retained 20 percent of all purported profits from the “proprietary trading program” as a fee for his services. However, according to the complaint, all of Huffman’s representations of “profits” from trading were false, and his claimed rates of return were completely fictitious.

Furthermore, Huffman allegedly misappropriated participants’ funds for a variety of personal uses, including 1) purchasing multiple motor vehicles, including two Land Rovers and a Smart Car, 2) using at least $71,255 on purchases related to his classic car collection, 3) spending approximately $188,583 on personal travel and luxury vacations, including Disney cruises and first class airfare to Hawaii and Las Vegas, Nevada, and 4) using approximately $51,540 for charitable contributions in his name. The trip to Hawaii was allegedly a 25thwedding anniversary celebration for Huffman, and he brought along several pool participants on the trip, purportedly at his own expense. Huffman never disclosed to these participants that he was using their funds to pay for the luxury vacation, according to the complaint.
When Huffman could no longer sustain his fraudulent scheme, he admitted to special agents of the Charlotte, North Carolina office of the Federal Bureau of Investigation the fraudulent scheme and his participation, according to the complaint.
In September 2011, Huffman pleaded guilty to one count of commodities fraud (U.S. v. Mitchell Brian Huffman, Case No. 3:11-cr-246-RJC, U.S. District Court for the Western District of North Carolina).

The CFTC appreciates the assistance of the Office of the U.S. Attorney for the Western District of North Carolina and the Federal Bureau of Investigation, Charlotte Office.
CFTC Division of Enforcement staff responsible for this case are Timothy J. Mulreany, Michael Amakor, Paul Hayeck, and Joan Manley.”

COMMODITY POOL OPERATOR SETTLES CHARGES WITH CFTC

The following excerpt is from the CFTC website: Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against Dearborn Trading, Inc. (Dearborn), a commodity pool operator (CPO), and Joel Bronstein (Bronstein), Dearborn’s owner and principal, for failing to file a closing Annual Report (liquidation statement) for Dearborn Trading Fund, LLC, a commodity pool operated by Dearborn. The CFTC order requires Dearborn to pay a $180,000 civil monetary penalty and file the pool’s liquidation statement within 30 days of the entry of the order. The CFTC order finds that from about January 2009 until approximately June 2009, Dearborn was operating the pool when it ceased trading on or about June 30, 2009. Dearborn failed to file the pool’s closing Annual Report (liquidation statement) within 90 calendar days after the pool ceased trading, in violation of CFTC regulation 4.22(c), 17 C.F.R. § 4.22(c) (2009). The CFTC thanks the National Futures Association for its assistance."