CFTC CHARGES TWO UTAH RESIDENTS WITH FRAUD AND MISAPPROPRIATION

FROM:  COMMODITY FUTURES TRADING COMMISSION
CFTC Charges Utah Residents Christopher Hales, Eric Richardson and their Company, Bentley Equities, LLC, with Fraud and Misappropriation
CFTC seeks an emergency restraining order freezing defendants’ assets
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a federal court action in Utah charging Bentley Equities, LLC (Bentley), a Delaware corporation, and its principals, Christopher D. Hales and Eric A. Richardson, with fraud and misappropriation in connection with commodity futures trading. Richardson resides in Cedar Hills, Utah, and Hales is currently an inmate at the Florence, Colo., Federal Correction Complex. None of the defendants has ever been registered with the CFTC.

The CFTC’s complaint, filed May 2, 2012, in the U.S. District Court for the District of Utah, alleges that from at least April 2009 through August 2010, the defendants fraudulently solicited and accepted more than $1.1 million from approximately 38 pool participants and clients to trade commodity futures in a commodity pool account and in individual managed accounts.

The CFTC seeks an emergency restraining order freezing the defendants’ assets and prohibiting the destruction or alteration of the defendants’ books and records.

Specifically, according to the CFTC’s complaint, Bentley, Hales, and Richardson misrepresented to customers that their trading was profitable, and that they actively managed more than $1 million in commodity futures accounts. In reality, the complaint charges, the defendants were not successful commodity futures traders and never managed more than $480,000 in commodity futures trading accounts at one time. In fact, the defendants lost approximately $1,296,600 of the Bentley participants’ and managed clients’ funds trading commodity futures contracts, according to the complaint.

The complaint further charges that the defendants misappropriated at least $628,000 of customer funds for personal use, including food, clothing, auto expenses, and utility and credit card payments. The defendants also allegedly used misappropriated funds to make payments to existing participants and clients, as is typical of a Ponzi scheme.

To conceal their trading losses and misappropriation, defendants allegedly issued false account statements to participants and clients by altering trading statements that they received from the futures commission merchant carrying the Bentley pool account. These doctored statements falsely showed inflated account balances and profitable commodity futures trading returns, when, in fact, the defendants’ futures trading for their participants and clients “consistently lost money,” according to the complaint.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

In November 2011, Hales was sentenced to more than seven years imprisonment and ordered to pay $12,719,236 in criminal restitution in connection with a judgment entered against him in a related criminal matter for the conduct alleged in the CFTC’s case, as well as mortgage fraud. United States v. Christopher D. Hales,No. 2:10-CR-183-TS-SA-1 (D. Utah, Sept. 2, 2010).

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the District of Utah, the U.S. Department of Housing and Urban Development —Office of Inspector General, the U.S. Postal Inspection Service, and the Federal Bureau of Investigation.

COMPANY TO PAY $140,000 FOR ACTING AS UNREGISTERED RETAIL FOREX DEALER

FROM:  COMMODITY FUTURES TRADING COMMISSION
May 1, 2012
Federal Court in Illinois Orders Trading Point of Financial Instruments Ltd. to Pay $140,000 Penalty for Acting as Unregistered Retail Forex Dealer

Trading Point also ordered to cease soliciting U.S. customers and to modify website
Action part of CFTC’s second nationwide sweep against forex firms for failure to register under the 2008 Farm Bill, the Dodd-Frank Act, and CFTC regulations

Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent order requiring Trading Point of Financial Instruments Ltd. (Trading Point), of Limassol, Cyprus, to pay a $140,000 civil monetary penalty to settle CFTC charges. The order finds that Trading Point unlawfully solicited U.S. customers to engage in foreign currency (forex) transactions and operated as a Retail Foreign Exchange Dealer (RFED) without being registered with the CFTC.

The consent order, entered April 25, 2012, by Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois, permanently bars Trading Point from engaging in any conduct that violates the Commodity Exchange Act (CEA) and CFTC regulations, as charged. The order also requires Trading Point to close all U.S. customer accounts and to return each U.S. customer all funds in the customer’s account. It also directs Trading Point to publish a prominently displayed notice on its website, stating that Trading Point does not provide services for U.S. customers.

The order finds that between November 2010 and September 2011, Trading Point solicited orders from low net worth U.S. customers to open leveraged forex trading accounts through its website. The order finds that Trading Point acted as an RFED by offering to be, and acting as, a counterparty buying and selling forex contracts with U.S. customers without being registered as an RFED.

The order settles CFTC charges brought against Trading Point as part of the CFTC’s second “sweep” against forex firms for unlawfully soliciting U.S. customers to engage in forex transactions and operating as RFEDs without being registered with the CFTC (see CFTC Press Release 6108-11, September 8, 2011).

In the forex market, RFEDs and some registered commodity futures brokers may buy forex contracts from, or sell forex contracts to, individual investors who possess sufficient net worth to qualify as eligible contract participants (ECPs). Firms that market forex contracts to customers who are not eligible ECPs are required to register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance.
CFTC Division of Enforcement staff members responsible for this case are Jon J. Kramer, Elizabeth M. Streit, Joy McCormack, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.

CFTC SETTLES FRAUD CHARGES WITH MAN SELLING SOFTWARE TRADING SYSTEM

FROM:  COMMODITY FUTURE TRADING COMMISSION

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled charges that Ghassan Tawachi of Coral Gables, Fla., defrauded customers through sales of his software trading systems by falsely claiming expertise as a successful professional trader and by misappropriating $40,000 from one customer.  Tawachi is a registered Commodity Trading Advisor.

The CFTC order requires Tawachi to pay a $140,000 civil monetary penalty and restitution of $140,839.70.  The order also imposes permanent trading and registration bans against Tawachi.

According to the order, from July 2010 until at least September 30, 2011, Tawachi marketed the “Bentley Automated Trading Systems” and the “Avanti Automated Trading System” through two Internet websites.  In his marketing for both systems, Tawachi claimed that he formulated his trading software based upon his purported substantial professional trading experience, the order finds. 

On both websites, Tawachi maintained that as a “Professional trader,” he had developed his trading systems based upon “more than 10 years of professional experience.”  Instead, the order finds that Tawachi had no professional trading experience, and his trading background was limited to a single personal futures account opened three years earlier, through which he had conducted limited and unsuccessful trading.

The order further finds that Tawachi accepted $40,000 directly from one of his software customers to be traded in his personal futures account pursuant to his trading system, and that he claimed to have made up to $100,000 as a result of his successful trading.  The order further finds that Tawachi guaranteed the customer a 20 percent monthly return if the customer committed to a 90-day investment period.  The order finds that Tawachi subsequently failed to return any of the customer’s funds, and account records demonstrated that none of the customer’s funds were deposited into Tawachi’s futures trading accounts.

GEORGIA RESIDENT CHARGED WITH FOREIGN CURRENCY FRAUD AND MISAPPROPRIATION

FROM:  CFTC 
CFTC Charges Georgia Resident Robert A. Christy and His Company Crabapple Capital Group LLC with Foreign Currency Fraud and Misappropriation

Federal court enters emergency order freezing defendants’ assets and protecting books and records
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on April 19, 2012, Judge Richard W. Story of the U.S. District Court for the Northern District of Georgia, entered an emergency order freezing the assets of defendants Robert A. Christy of Milton, Ga., and his companyCrabapple Capital Group LLC (Crabapple) of Alpharetta, Ga. The order also prohibits the defendants from destroying or altering books and records. The judge set a hearing date for May 1, 2012.
The order stems from the filing of a federal court action on April 19, 2012, against the defendants, charging them with foreign currency (forex) fraud, misappropriation, and making false statements to the National Futures Association (NFA).  Both Christy and Crabapple are registered with the CFTC and are NFA members.

The CFTC complaint alleges that from at least October 2008 to the present, Christy and Crabapple have defrauded at least 20 commodity pool participants who invested at least $1,311,000 in a commodity pool that trades forex and is operated by Crabapple.

According to the complaint, the defendants portrayed Crabapple as a reputable and well-established investment firm, claiming that Crabapple traded forex profitably since 2006 and is affiliated with a larger investment firm, which purportedly has over $50 million in assets under management.  The CFTC complaint further alleges that instead of using pool participants’ money to trade forex, defendants used it to pay for, among other things, Christy’s travel, restaurant meals, groceries, and other personal expenses, as well as payments to members of Christy’s family.  In total, defendants allegedly misappropriated at least $800,000.

In their sales solicitations, according to the complaint, the defendants advertise a “conservative” forex investment strategy that targets annual returns of approximately eight percent with a low risk of loss.  Defendants gave prospective customers marketing literature, including a formal disclosure document and monthly bulletins, which showed from 2006 to 2011: (a) average annual returns ranging from 15 percent to 20 percent; (b) 55 profitable months compared to only 10 unprofitable ones; and (c) the highest monthly losses reaching only negative 0.74 percent.  According to the complaint, however, this performance history was a lie, as the defendants’ actual forex trading records show consistent and significant losses from 2006 to 2011.  The complaint alleges that defendants’ claim that Crabapple had $50 million in assets under management was likewise false.

In order to perpetuate their fraud and misappropriation, the defendants allegedly prepared and distributed to pool participants false monthly account statements that showed pool participants earning purported monthly profits on their investments, even in months when defendants were losing money in all of their forex trading accounts, according to the complaint.

Finally, the complaint alleges that defendants attempted to keep their fraud hidden from the NFA.  During a 2011 examination, defendants provided NFA with false accounting records that labeled money received from pool participants as “loans from Christy.”  In two written documents given to the NFA, Christy falsely certified, among other things, that Crabapple did not operate any trading pools and had not received any money from customers to trade forex and that all of the money deposited with Crabapple represented Christy’s own funds.

In January 2012, NFA filed membership actions against Christy and Crabapple barring them from soliciting or accepting any funds from customers and from disbursing or transferring any funds without prior approval from NFA.  Despite this, the defendants continue to deposit money received from pool participants into Crabapple’s checking account and expend funds without NFA’s prior approval, according to the complaint.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of Georgia, the U.S. Marshals Service, Northern District of Georgia, and the NFA.

CFTC Division of Enforcement staff responsible for this case are Jo Mettenburg, Thomas Simek, Stephen Turley, Charles Marvine, Rick Glaser, and Richard 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.

SEC OBTAINS AN ASSET FREEZE TO STOP ALLEN WEINTRAUB FROM PURPORTEDLY SELLING PRE-IPO FACEBOOK SHARES

FROM:  SEC

April 24, 2012

On April 4, 2012, the U.S. District Court for the Southern District of Florida in Miami issued an Order to Show Cause and Other Emergency Relief (Order) to halt Allen Weintraub’s ongoing fraudulent scheme of selling securities of an investment vehicle that he falsely represented owned pre-IPO shares of Facebook, Inc. The Court’s Order temporarily freezes the assets of Weintraub and certain shell companies through which he apparently operates. The order also directed Weintraub to demonstrate, among other things, why he should not be held in contempt for violating the Court’s Final Judgment in SEC v. Allen E. Weintraub and AWMS Acquisition, Inc., d/b/a Sterling Global Holdings, Case No. 11-21549-CIV-HUCK/BANDSTRA (S.D.Fla.), which was entered on January 10, 2012 (Final Judgment). The Final Judgment enjoined Weintraub from violating, among other things, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The Commission’s motion for an order to show cause alleges that in February 2012, Weintraub, acting through an alias, William Lewis, and through entities named Private Stock Transfer, Inc., PST Investments III, Inc. (PST Investments), and World Financial Solutions, defrauded investors by selling them worthless shares in PST Investments. Weintraub had falsely represented that he would sell the investors pre-IPO shares of Facebook, Inc., and that PST Investments had an ownership interest in Facebook stock. The Commission’s motion also alleges that Weintraub was utilizing the website privatestocktransfer.com to perpetrate his scheme. The Court’s Order directed that this website be deactivated. 

On December 30, 2011, the Court entered an order granting the Commission’s motion for summary judgment against Weintraub and his shell company, Sterling Global. In its Order, the Court found that Weintraub deceived the public by making false and misleading statements regarding Sterling Global’s ability to purchase and operate Eastman Kodak Company and AMR Corporation. The Court’s January 2012 Final Judgment permanently enjoined Weintraub and Sterling Global from future violations of Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e-8 thereunder, and ordered them to each pay a civil money penalty in the amount of $200,000.