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 ORDERS BROKER EMPLOYEE TO PAY PENALTY FOR MAKING FALSE STATEMENTS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Orders Futures Broker Employee Susan Butterfield to Pay $50,000 Penalty in Settlement of Charges of Making False Statements to the CFTC During Her Investigative Testimony

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring Susan Butterfield of New Lenox, Illinois, to pay a $50,000 civil monetary penalty for making false statements of material fact in testimony to CFTC staff during a CFTC Division of Enforcement investigation. The Order enforces the false statements provision of the Commodity Exchange Act (CEA), which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).

According to the CFTC’s Order, Butterfield, an employee of a company registered with the Commission as an introducing broker (the IB), handled various clerical and administrative responsibilities concerning trading on the floor of the Chicago Board of Trade (CBOT). Her responsibilities included accepting and recording customer orders. When done properly, this involved time-stamping paper order tickets contemporaneously with the receipt of a customer commodity futures or options order to accurately record the time of day when the IB received the order.

On January 31, 2013, Butterfield gave sworn testimony in an investigation being conducted by the CFTC’s Division of Enforcement. The CFTC Order finds that during that testimony, Butterfield knowingly made false and misleading statements regarding whether she had improperly pre-stamped order tickets, i.e., whether she stamped order tickets in blank, prior to the time when a customer order was actually received. As the Order states, this testimony was significant in that use of pre-stamped order tickets may violate Commission Regulations and CBOT rules and also may facilitate unlawful trade allocation schemes in which brokers decide who will receive trades only after they are executed, potentially allowing them to profit at their customers’ expense.

The CFTC Order finds that prior to her CFTC testimony Butterfield told her supervisor, who was a principal at the IB, that “we pre-stamp orders and it’s something that is – that we should not be doing.” However, on January 31, 2013, when the Division of Enforcement staff questioned Butterfield on the IB’s pre-stamping practice, Butterfield falsely told the staff that she “never pre-stamped any [order] tickets.” Later during the course of her testimony the same day, Butterfield admitted to various instances of pre-stamping order tickets, but only after she was confronted by documents that plainly contradicted her initial false testimony. Ultimately, having been confronted with evidence that demonstrated her falsehoods, Butterfield admitted by the end of her testimony that it was in fact her daily practice to pre-stamp order tickets from multiple futures commission merchants throughout the trading session, in numbers amounting to dozens of order tickets every day.

David Meister, the CFTC’s Enforcement Director, stated: “When a witness walks into CFTC testimony he or she should plan to tell the truth to every question or face the consequences. We will use the new Dodd-Frank false statements provision against witnesses who provide false or misleading information to make sure it is well understood that lying is not an option.”

In addition to the $50,000 civil monetary penalty, the CFTC Order requires Butterfield to cease and desist from violating the relevant provision of the CEA, to never apply for or claim exemption from registration with the CFTC or engage in any activity requiring such registration or exemption, and to never act as a principal or officer of any entity registered or required to be registered with the CFTC.

The CFTC Division of Enforcement staff members responsible for this matter are Allison Passman, Theodore Z. Polley III, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.