CFTC ORDERS MAN TO PAY $344,000 FOR ROLE IN COMMODITY POOL FRAUD SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

CFTC Orders New York Resident Jacob N. Stein to Pay More than $344,000 in Restitution and Civil Monetary Penalty for Commodity Pool Fraud and Misappropriation

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring Jacob N. Stein of Hankins, New York, individually and doing business as TEPdesign, Inc., to pay restitution of $244,400 to defrauded customers and a $100,000 civil monetary penalty, for committing fraud and misappropriation in connection with a commodity pool that traded leveraged or margined off-exchange foreign currency contracts (forex). Neither Stein nor TEPdesign, Inc. has ever been registered with the CFTC.

According to the CFTC’s Order, from about January 2010 through September 2012, Stein, without registering with the CFTC as a Commodity Pool Operator, solicited and obtained approximately $524,000 from at least 17 investors (Pool Participants) to participate in a commodity pool for the purpose of trading leveraged or margined forex. Stein used approximately $83,000 of the funds solicited to trade forex, of which over $80,000 was lost in forex trading, the Order states. Instead of reporting these losses to the Pool Participants, Stein created and distributed to the Pool Participants false account statements indicating that Stein was earning profits for the Pool Participants through forex trading. The Order also finds that the remaining funds, approximately $441,000, were misappropriated by Stein to pay fabricated “profits” and returns of principal to Pool Participants and for Stein’s personal expenses, such as car payments and retail purchases. Ten Pool Participants are still owed approximately $244,400 in principal, the Order finds.

In addition to ordering restitution and imposing a civil monetary penalty, the CFTC Order also requires Stein to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposes permanent bans on Stein’s trading, registration, and certain other CFTC-regulated activities.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this case are Patrick Daly, Xavier Romeu-Matta, Michael C. McLaughlin, David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.

COURT ORDERS $1.5 MILLION IN SANCTIONS IN FOREX FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court in Texas Orders $1.5 Million in Sanctions against Defendant Mark E. Rice for Fraudulent Forex Scheme

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order requiring Defendant Mark E. Rice, of Sugar Land, Texas, to pay $827,000 in restitution and a $673,000 civil monetary penalty to settle CFTC charges related to fraudulent solicitation and misappropriation of customer funds to trade leveraged off-exchange foreign currency contracts (forex). The Consent Order of Permanent Injunction, entered on January 13, 2014, by Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas, also imposes permanent trading and registration bans against Rice and prohibits him from violating provisions of the Commodity Exchange Act, as charged.

The Consent Order stems from a CFTC Complaint filed on June 29, 2011, against Rice and Rice’s company, Financial Robotics, Inc. (see CFTC Press Release 6067-11).

The Order finds that, from June 2008, Rice operated a fraudulent scheme that solicited approximately $1.7 million from one individual to trade leveraged off-exchange forex contracts. According to the Order, Rice falsely told his customer, among other things, that his investment was “risk free” and insured against loss and that the return of his principal was guaranteed. The Order further finds that Rice misappropriated at least $576,000 of his customer’s funds by transferring the money to unrelated Rice-controlled companies and, thereafter, spending at least $404,000 of those funds for Rice’s personal and business expenses.

The CFTC’s litigation continues against Financial Robotics, Inc.

The CFTC thanks the National Futures Association, the British Virgin Islands Financial Services Commission, The Netherlands Authority for the Financial Markets, and the United Kingdom’s Financial Conduct Authority for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Kevin S. Webb, Michelle S. Bougas, James H. Holl, III, and Gretchen L. Lowe.

COMMODITY POOL OPERATOR ORDERED TO PAY OVER $470,000 TO SETTLE FRAUD CHARGES

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
CFTC Orders David R. Lynch to Pay More than $470,000 in Restitution and a Civil Monetary Penalty to Settle Charges of Fraudulent Misappropriation, Fraudulent Solicitations, and False Statements

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring David R. Lynch of Stuart, Florida, to make restitution of $171,297 to defrauded customers and pay a $300,000 civil monetary penalty, among other sanctions, for fraudulent misappropriation, fraudulent solicitations, and false statements in connection with a commodity pool trading leveraged or margined off-exchange foreign currency contracts (forex). Lynch has never been registered with the CFTC.

According to the CFTC’s Order, from about December 2008 through July 4, 2013, Lynch operated a commodity pool and fraudulently solicited at least $348,450 from at least 14 pool participants. Lynch falsely told pool participants that he had earned as much as 7 percent per month trading forex, that they could never lose their principal, and that they could get their funds back at any time. However, Lynch deposited only a portion of his pool participants’ funds in forex trading accounts and the trading he did was unprofitable, the Order finds.

The CFTC’s Order also finds that Lynch misappropriated over $126,000 of his pool participants’ funds by using part of those funds to pay his personal expenses and the remainder to pay false profits or purported returns of capital to some pool participants in the manner of a Ponzi scheme. Further, to conceal his trading losses and misappropriations, Lynch issued monthly account statements to pool participants that falsely showed that pool participants were earning consistent profits.

In addition to ordering restitution to be made and imposing a civil monetary penalty, the CFTC Order also requires Lynch to cease and desist from further violations of the Commodity Exchange Act and a CFTC regulation, as charged, and imposes permanent bans on trading, registration, and certain other commodity related activities.

CFTC Division of Enforcement staff members responsible for this case are Glenn I. Chernigoff, Alison B. Wilson, Kara L. Mucha, and Gretchen L. Lowe.