CFTC ANNOUNCES COURT PERMANENT BAN FROM TRADING AND REGISTRATION ON N.C. MAN

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court Permanently Bans North Carolina Resident Neal Hall from Trading and Registration and Imposes a $210,000 Penalty for Violating the CFTC’s Registration and Consumer Notice Provisions

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that the Honorable James A. Beaty, Jr. of the U.S. District Court for the Middle District of North Carolina entered an Order imposing permanent trading and registration bans and a $210,000 civil monetary penalty against Defendant Neal E. Hall of Reidsville, North Carolina for registration violations and failure to include certain required disclosures on his website.

The Order entered on October 6, 2014, follows a Memorandum Opinion entered by the court on November 21, 2013, both of which stem from a civil enforcement action filed by the CFTC against Hall on May 31, 2011 (see CFTC Press Release 6049-11).  The CFTC Complaint charged that, starting no later than June 2010 and continuing to June 2011, Hall used the mails and other avenues of interstate commerce while offering his services as a Commodity Trading Advisor (CTA) in exchange for payment in the form of either flat charges or a percentage of profits from customers.

The court found that Hall used his website to solicit clients both to subscribe to his e-mini S&P 500 futures trading program and to have him manage their trading accounts, and, as a result, Hall violated the Commodity Exchange Act, by failing to register with the CFTC as a CTA.

Additionally, the court found that Hall violated CFTC Regulations 4.41(a)(3) and (b).  Those Regulations require cautionary statements to accompany the use of client testimonials and the presentation of the performance of a simulated or hypothetical commodities account.  Regulation 4.41(b) further dictates that the cautionary statement accompanying the presentation of the performance of simulated or hypothetical trading results contain specific language and be prominently displayed in immediate proximity to the hypothetical results.

The court found that Hall violated Regulation 4.41(a)(3) because his website lacked a cautionary statement despite featuring testimonials from unnamed clients.  Similarly, the court found that Hall violated Regulation 4.41(b) because his website did not contain a disclaimer with the specific language required by the Regulation that is prominently displayed in immediate proximity to the hypothetical trading results.

The CFTC appreciates the assistance of the North Carolina Securities Division and the Office of the U.S. Attorney for the Middle District of North Carolina.

MAN ORDERED TO PAY OVER $17 MILLION FOR RUNING FOREX POOLED INVESTMENT FRAUD

FROM U.S. COMMODITY FUTURES TRADING COMMISSION

Federal Court in Texas Orders Christopher B. Cornett to Pay over $17 Million in Sanctions in Foreign Currency Fraud Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order of default judgment and permanent injunction requiring defendant Christopher B. Cornett of Buda, Texas, to pay $10.16 million in restitution and a $6.78 million civil monetary penalty in connection with a foreign currency (forex) pooled investment fraud. The order, entered on August 24, 2012, by Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, also imposes permanent trading and registration bans against Cornett and permanently prohibits him from further violations of federal commodities law, as charged.

The court’s order stems from a CFTC complaint filed on February 2, 2012, charging Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register with the CFTC as a commodity pool operator.

The order finds that, from at least June 2008 through at least October 2011, Cornett solicited prospective pool participants to invest in a pooled forex investment and that he acted as the manager and operator of the pool. The pool was referred to at various times as ITLDU, ICM, International Forex Management, LLC, and/or IFM, LLC, according to the order. In his solicitations, Cornett falsely told prospective pool participants that, while there were weeks when he either lost money or broke even trading forex, he had never experienced a losing month or a losing year trading forex, the order finds.

The order also finds that, from June 18, 2008 through September 2010, Cornett solicited approximately $7.07 million from pool participants, participants redeemed approximately $1.64 million, and Cornett lost approximately $4.17 million of the pool’s funds trading forex. During this period, Cornett had only one profitable month trading forex and earned little, if any, fees for acting as the pool’s operator, the order finds. Thus, during this period, Cornett misappropriated approximately $1.26 million of the pool’s funds and for most, if not all of the period, provided participants with false weekly reports/account statements, the order finds.

The court’s order further finds that, from October 2010 through October 2011, Cornett solicited an additional approximately $6.95 million from pool participants. Cornett transferred approximately $3.37 million to forex trading accounts at six foreign brokers and lost approximately $2.3 million at five of the brokers, and likely lost an additional $905,000 at the sixth broker trading forex with pool funds, the order finds. As of October 2011, Cornett had misappropriated approximately $1 million of the pool’s funds and less than $520,000 remained in bank accounts in the names of the pool, according to the order.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Texas, Internal Revenue Service Criminal Investigation, and the Federal Bureau of Investigation.

The CFTC also appreciates the assistance of the U.K. Financial Services Authority, the British Virgin Islands Financial Services Commission, the Ontario Securities Commission, Germany’s BaFin, the Swiss Financial Market Supervisory Authority, the Eastern Caribbean Securities Regulatory Commission, and St. Vincent and the Grenadines’ International Financial Services Authority.

CFTC Division of Enforcement staff members responsible for this action are Patrick M. Pericak, Daniel Jordan, Jessica Harris, Rick Glaser, and Richard B. Wagner.