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.

COURT ORDERS INTRODUCING BROKER TO PAY FINE FOR RECORD-KEEPING VIOLATIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court in Illinois Orders Chicago-based Introducing Broker New World Holdings, LLC to Pay $50,000 to Settle Record-Keeping Violation Action

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order against Defendant New World Holdings, LLC (NWH) of Chicago, Illinois, requiring NWH to pay a $50,000 civil monetary penalty for destroying business records and failing to diligently supervise employees.

The Consent Order for Permanent Injunction, entered by U.S. District Court Judge Robert W. Gettleman of the Northern District of Illinois on January 8, 2014, also permanently prohibits NWH from violating the Commodity Exchange Act and CFTC Regulations, as charged in the Complaint filed against NWH and two other Defendants on July 22, 2010 (see CFTC Press Release 5861-10). NWH is registered with the CFTC as an Introducing Broker and Commodity Trading Advisor.

The Order finds that, beginning on or about March 10, 2006, NWH introduced an account in the name of Idylic Solutions Pty Ltd. (Idylic) to a Futures Commission Merchant. In addition to the Idylic account, NWH introduced a number of other accounts from the same individuals who opened the Idylic account, or associated with them, including but not limited to accounts in the name of Unifund, Ltd., 888 Management, Inc., Secured Bond, Ltd., and Sagacity, Ltd. (collectively referred to as the “Pooled Accounts”). Deposits into the Idylic account and the Pooled Accounts in the aggregate exceeded $21 million throughout the relevant period, according to the Order.

NWH failed to retain all of the business records related to the Idylic account and Pooled Accounts, relating to NWH’s business of dealing in commodity futures, commodity options, and cash commodities, including but not limited to emails that were prepared in the course of its business of dealing in commodity futures, and further failed to keep said records for a period of five years from the date thereof, according to the Order.

The CFTC appreciates the assistance of the Australian Securities and Investments Commission in this matter.

CFTC staff members responsible for this case are Eugene Smith, Elizabeth N. Pendleton, Michael Amakor, Timothy J. Mulreany, and Paul Hayeck.

MAN AND COMPANY ORDERED TO PAY $3.2 MILLION IN FOREIGN CURRENCY FRAUD ACTION

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court in California Orders Victor Yu and His Company to Pay over $3.2 Million in Foreign Currency Fraud Action

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order requiring Defendants Victor Yu of San Jose, Calif., and his company, VFRS, LLC (VFRS), to pay restitution of nearly $2.15 million, disgorgement of more than $270,000, and a civil monetary penalty of over $800,000. The Order also imposes permanent trading and registration bans against Yu and VFRS and permanently prohibits them from further violations of federal commodities law, as charged.

The Order for Default Judgment and Permanent Injunction was entered on March 26, 2013, by Judge Yvonne Gonzales Rogers of the U.S. District Court for the Northern District of California. The Order stems from a CFTC Complaint filed on July 26, 2012, that charged Yu and VFRS with defrauding clients in connection with off-exchange foreign currency (forex) trading and failing to register with the CFTC as a Commodity Trading Advisor (CTA).

The court’s Order finds that the Defendants fraudulently induced more than 100 individuals to open forex trading accounts. In their client solicitations, the Defendants misrepresented that they had developed trading software that made forex trading "extremely safe" and that would prevent clients from ever reaching certain loss thresholds, the Order finds. The Defendants also misrepresented to some prospective clients that their trading software had shown positive returns on every trade it ever made and had successfully predicted activity in the currency markets back to the 1920s, according to the Order.

The Order further finds that, from 2009 to the present, the Defendants induced their clients to invest over $5 million in forex trading accounts, and clients lost almost $2.15 million during the same period. The Defendants received over $270,000 in service fees from those clients, the Order finds.

Once clients opened forex trading accounts, the Order finds that Yu and VFRS instructed them to give Defendants their log-in and password information so that the Defendants could place trades in their accounts. By this conduct, Yu acted as a CTA without being registered as such, according to the Order.

CFTC Division of Enforcement staff members responsible for this case are Robert Howell, Jennifer Smiley, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard Wagner.