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.

ARIZONA RESIDENT GETS 30 MONTHS IN PRISON IN COMMODITY POOL FRAUD CASE

FROM:   COMMODITY FUTURES TRADING COMMISSION 

CFTC Obtains Court Order against Arizona Resident Thomas L. Hampton for Issuing False Account Statements and Operating as an Unregistered Commodity Pool Operator

Hampton ordered to pay a $1.5 million penalty and permanently barred from any commodity-related activities

In a related criminal matter, Hampton sentenced to 30 months in prison and ordered to pay over $4.8 million in restitution

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge H. Russel Holland of the U.S. District Court for the District of Arizona entered an Order of final judgment by default and permanent injunction against Defendant Thomas L. Hampton of Scottsdale, Arizona. The Order requires Hampton to pay a $1.5 million civil monetary penalty, imposes permanent trading and registration bans on him, and prohibits him from violating the Commodity Exchange Act (CEA), as charged. Hampton has never been registered with the CFTC.

The Order, entered on January 23, 2014, stems from a CFTC Complaint filed on June 11, 2013, charging Hampton with acting as an unregistered Commodity Pool Operator (CPO) and issuing false account statements in violation of the CEA (see CFTC Press Release 6609-13, June 12, 2013).

The Order finds that, from approximately September 2010 through at least September 2011, Hampton, while acting as an unregistered CPO, operated Hampton Capital Markets, LLC, an Arizona limited liability company, as a commodity pool. The Order finds that Hampton solicited approximately $5.2 million from at least 72 pool participants to invest in the pool for the purpose of trading commodity futures contracts, including E-mini S&P 500 futures contracts and E-mini Dow futures contracts, as well as securities-based index products. The Order also finds that Hampton defrauded pool participants by issuing false account statements that represented that the pool was generating significant trading profits, when, in fact, Hampton’s actual trading in the HCM Pool accounts resulted in net losses virtually every month.

In a related criminal action, on April 19, 2013, Hampton pleaded guilty to one count of commodities fraud. In October 2013, Hampton was sentenced to 30 months in prison and was further ordered to pay over $4.8 million in restitution (United States v. Thomas Hampton, Case No. 13-cr-00301-RWS (United States District Court for the Southern District of New York)).

The CFTC appreciates the assistance of the Arizona Corporation Commission, Securities Division, and the U.S. Attorney’s Office for the Southern District of New York.

CFTC Division of Enforcement staff responsible for this case are Eugene Smith, Tracey Wingate, Kyong J. Koh, Peter M. Haas, Paul G. Hayeck, and Joan Manley.

COMPLAINT FILED BY CFTC AGAINST MAN WHO OPERATED UNREGISTERED COMMODITY POOL

FROM: COMMODITY FUTURES TRADING COMMISSION

CFTC Files Enforcement Action against Arizona Resident for Issuing False Account Statements and Operating as an Unregistered Commodity Pool Operator


Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil complaint against Thomas L. Hampton, an Arizona resident. The CFTC’s complaint charges Hampton with acting as an unregistered commodity pool operator (CPO) and issuing false account statements in violation of the Commodity Exchange Act.

The complaint filed on June 11, 2013, in the United States District Court for the District of Arizona Phoenix Division alleges that from approximately September 2010 through at least September 2011 ("relevant period"), Hampton, while acting as an unregistered CPO, operated Hampton Capital Markets, LLC, an Arizona limited liability company, as a commodity pool and/or hedge fund. The complaint further alleges that, during the relevant period, Hampton solicited approximately $5.2 million from at least 72 pool participants to invest in the pool for the purpose of trading commodity futures contracts, including E-mini S&P 500 futures contracts and E-mini Dow futures contracts, as well as securities based index products. The complaint also alleges that Hampton defrauded pool participants by issuing false account statements that represented that the pool was generating significant trading profits, when Hampton knew that the pool was sustaining consistent net losses.

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.

The CFTC appreciates the assistance of the Arizona Corporation Commission, Securities Division and the United States Attorney’s Office for the Southern District of New York.

CFTC Division of Enforcement staff responsible for this case are: Eugene Smith, Tracey Wingate, Kyong J. Koh, Peter M. Haas, Paul G. Hayeck, and Joan Manley.




 

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.

COURT ORDERS $4.8 MILLION IN FINES AGAINST COMPANY, PRINCIPALS FOR ISSUING FALSE ACCOUNT STATEMENTS IN A FOREX FUND

FROM:  CFTC
Federal Court in Texas Orders Total Call Group, Inc. and its Principals to Pay over $4.8 Million in Fines for Making False Representations and Issuing False Account Statements in Forex Fraud
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court entered an order of default judgment and permanent injunction against Total Call Group, Inc. (aka TPFX, Inc., Power Play FX) of Frisco, Texas, and its principals, Craig B. Poe, also of Frisco, and Thomas Patrick Thurmond (aka Patrick Thurmond) of San Antonio, Texas.

The court’s order requires Poe and Thurmond, respectively, to pay a civil monetary penalty of $3.24 million and $1.62 million and holds Total Call Group jointly and severally liable for the payment of these amounts.

The order, entered on March 30, 2012, by Judge Richard A. Schell of the U.S. District Court for the Eastern District of Texas, stems from a CFTC enforcement action filed on September 29, 2010, that charged the defendants with issuing false customer account statements in connection with an off-exchange foreign currency (forex) fraud (see CFTC Press Release 5908-10).

The order finds that, beginning in early 2006 and continuing until October 2008, the defendants solicited approximately $808,000 from at least four customers to trade forex. In soliciting the funds, Thurmond made false representations to one or more of Total Call Group’s customers, including that Poe had been trading forex and living off the income for over four years, and that he and Poe had personally provided over $1 million to Total Call Group, according to the order.

At the end of August 2008, the defendants sustained trading losses and incurred trading fees amounting to approximately 90 percent of the then current balance of the trading accounts, according to the order. However, the defendants did not report these substantial losses to customers, but instead continued to promote the profitability of trading and solicited additional funds, the order finds.

In September through December 2008, the order finds that the defendants traded and lost almost all of the remaining funds in the trading accounts. Despite these losses, Poe sent false account statements to customers, including several false statements after the trading accounts were fully liquidated in November 2008, that collectively reflected a positive balance of over $750,000 in Total Call Group’s forex trading accounts.

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