FROM: SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Oct. 26, 2012 — The Securities and Exchange Commission today charged an insurance company CEO with insider trading based on confidential information he obtained in advance of a private investment firm acquiring a significant stake in a Denver-based oil and gas company
The SEC alleges that Michael Van Gilder learned from a Delta Petroleum Corporation insider that Beverly Hills-based Tracinda — which has previously owned large portions of companies such as MGM Resorts International, General Motors, and Ford Motor Company — was planning to acquire a 35 percent stake in Delta Petroleum for $684 million. Van Gilder subsequently purchased Delta Petroleum stock and highly speculative options contracts. He tipped several others, encouraging them to do the same, including a pair of relatives via an e-mail with the subject line "Xmas present." After Tracinda’s investment was publicly announced, Delta Petroleum’s stock price shot up by almost 20 percent. Van Gilder and his tippees made more than $161,000 in illegal trading profits.
The U.S. Attorney’s Office for the District of Colorado today announced a parallel criminal action against Van Gilder.
"Michael Van Gilder crossed the line when he took advantage of highly confidential corporate information to make trades and reap illicit profits," said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office. "He may have thought that he could get away with it, but he is faced today with the consequences of his actions."
According to the SEC’s complaint filed in federal court in Denver, Van Gilder is the CEO of Van Gilder Insurance Company. He obtained the confidential information about Tracinda’s proposed investment and loaded up on Delta Petroleum stock and options in November and December 2007. He then tipped his broker, a co-worker, and relatives.
The SEC alleges that a mere two minutes after speaking to his source at Delta Petroleum on December 22, Van Gilder e-mailed two relatives with the "Xmas present" subject line and stated, "my present (just kidding) is that I can’t stress enough the opportunity right now to buy Delta Petroleum." That same day, Van Gilder contacted his broker and arranged to purchase more Delta stock and options for himself. Following the public announcement, Van Gilder reaped approximately $109,000 in illegal profits and his broker, co-worker, and a relative made approximately $52,000.
The SEC’s complaint charges Van Gilder with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and seeks a final judgment ordering him to disgorge his and his tippees’ ill-gotten gains and pay prejudgment interest and a financial penalty, and permanently enjoining him from future violations of these provisions of the federal securities laws.
The SEC’s investigation, which is continuing, has been conducted by members of the SEC’s Market Abuse Unit — Michael Holland and Joseph Sansone in New York and Jeffrey Oraker and Jay Scoggins in Denver — with substantial assistance from Neil Hendelman of the New York Regional Office. Thomas Krysa, Regional Trial Counsel of the Denver Regional Office, Jeffrey Oraker and Michael Holland will handle the SEC’s litigation.
The SEC thanks the U.S. Attorney’s Offices for the District of Colorado and the Southern District of New York as well as the Federal Bureau of Investigation for their assistance in this matter.
FROM: U.S. FEDERAL DEPOSIT INSURANCE CORPORATION
International Association of Deposit Insurers Marks Tenth Anniversary and
Elects New President in London
The Federal Deposit Insurance Corporation (FDIC), the International Association of Deposit Insurers (IADI), the Bank Guarantee Fund of Poland and the Financial Services Compensation Scheme (FSCS) today announced that Acting FDIC Chairman Martin Gruenberg completed his five-year term as President of the IADI during the 11th Annual General Meeting (AGM) and Conference in London this week. Mr. Gruenberg also served as Executive Council Chairman of the Association. Mr. Gruenberg was first elected as IADI's President to serve a three-year term and then re-elected for a two-year term. During the meeting, Jerzy Pruski, President of the Management Board of the Bank Guarantee Fund of Poland, was elected IADI's President and Chairman of the Executive Council.
"It has been a privilege to serve as IADI's President for the past five years," said Mr. Gruenberg. "The financial crisis highlighted the importance of deposit insurance to financial stability and afforded IADI an opportunity to provide valuable leadership during this period."
During the past five years, IADI developed and brought to fruition the first internationally accepted standards for effective deposit insurance systems; and shared its vision of deposit insurance expertise and its mission to enhance deposit insurance effectiveness by promoting guidance and international cooperation. IADI is now recognized as the standard-setting body for deposit insurance by all the major public international financial institutions, including the Financial Stability Board of the Group of 20 (G-20), the Basel Committee for Banking Supervision, the International Monetary Fund and the World Bank.
IADI, which is celebrating its tenth anniversary, is a non-profit organization based in Basel, Switzerland. It contributes to the stability of financial systems around the world by promoting international cooperation and best practices among deposit insurers and other parties responsible for financial safety-net arrangements. The Association has led the effort to establish international standards for effective deposit insurance systems and has sponsored research and training to develop, launch and enhance the operations of national deposit insurance systems. IADI has grown from 26 founding members to 84 participants and partners in its first ten years.
"Jerzy Pruski is an outstanding leader who demonstrates great insight and depth of knowledge on issues related to financial stability and the role of deposit insurance in the financial safety-net. I sincerely welcome Jerzy as President of IADI and as the Chairman of the Executive Council," said Mr. Gruenberg.
Mr. Pruski said, "I am honored to lead this important international organization. I also would like to recognize the Association's new Treasurer, Ms. Rose Detho, the Director of the Deposit Protection Fund Board of Kenya, and thank outgoing Treasurer Bakhyt Mazhenova, Chairman of the Kazakhstan Deposit Insurance Fund, for her tireless service during her tenure".
Mark Neale, Chief Executive of the Financial Services Compensation Scheme (FSCS) noted the success of the week's conference and thanked all participants and speakers. "Deposit protection is a vital component of consumer confidence and financial stability. Mr. Gruenberg's leadership of IADI helped to enhance and promote deposit protection schemes internationally. More than 200 people attended the IADI conference representing all of IADI's Executive Council Members, including representatives from more than 40 countries from around the world. The quality of the speakers and the event itself show how far we have come in the last decade."
Photo Crdit: U.S. Marshals Service
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges Floridian Christopher Smithers with Fraud in Connection with Commodity-Related Activities and Violations of a Federal Court’s Prior Orders
Smithers allegedly defrauded customers in trading commodity futures contracts and in the purchase of gold bullion
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a federal civil enforcement action in the U.S. District Court for the Southern District of Florida charging Christopher Smithers of Jupiter, Florida, with fraud in connection with his commodity-related activities in violation of the Commodity Exchange Act (CEA) and CFTC regulations. The CFTC complaint also charges Smithers with violating two prior U.S. District Court orders that, among other things, permanently prohibited Smithers from engaging in any commodity-related activities.
According to the complaint, filed on October 22, 2012, from at least October 2008 to March 2009, Smithers committed fraud by misrepresenting to customers that his commodity futures trading was profitable when it actually resulted in losses of $220,000. From June 22, 2011 through November 2011, Smithers allegedly falsely represented to various futures commission merchants the identity of the person who opened and controlled commodity trading accounts. Smithers made such misrepresentations to circumvent prior U.S. District Court orders that prohibited him from trading commodity futures contracts, according to the complaint.
The complaint also alleges that in 2011 Smithers misappropriated $162,980 of a customer’s funds that were provided to him for the purchase of gold bullion and that he used the funds for personal expenditures. Finally, during 2011, Smithers fraudulently solicited a customer for funds with which to trade commodity futures, according to the complaint.
The complaint alleges that Smithers’ commodity futures trading was in violation of two previous U.S. District Court for the Southern District of Florida orders of permanent injunction entered against him in CFTC v. Matrix Trading Group., Inc., David Weeden, and Christopher Smithers, Civil Action No. 00-8880-CIV-ZLOCH (S.D. Fla. Oct. 3, 2002) and CFTC v. Christopher Smithers, Prosperity Consultants, Inc., and Jack Smithers, Case No. 05-80592-CIV-Hurley (S.D. Fla. Nov. 6, 2006).
The CFTC complaint seeks civil monetary penalties and injunctive relief against Smithers.
CFTC Division of Enforcement staff responsible for this case are Harry E. Wedewer, Dmitriy Vilenskiy, Danielle E. Karst, John Einstman, Paul G. Hayeck, and Joan M. Manley.
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION,
Federal Court Orders Robert A. Christy and His Company, Crabapple Capital Group LLC, to Pay over $2.6 Million in Monetary Sanctions for Foreign Currency Fraud
Court permanently bars defendants from commodities industry
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order requiring defendants Robert A. Christy of Milton, Ga., and his company, Crabapple Capital Group LLC (Crabapple) of Alpharetta, Ga., to pay over $2.6 million in monetary sanctions for foreign currency (forex) fraud.
Specifically, the order requires the defendants to pay a $1,541,882 civil monetary penalty and $1,099,598 in restitution to settle CFTC charges that they operated a forex commodity pool fraud, misappropriated customer funds, and made false statements to the National Futures Association (NFA). The order also imposes permanent trading and registration bans against the defendants and permanently prohibits them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The order, filed on October 16, 2012, by Judge Richard W. Story of the U.S. District Court for the Northern District of Georgia, stems from a CFTC anti-fraud enforcement action filed against Christy and Crabapple on April 19, 2012 (see CFTC Press Release 6242-12, April 25, 2012).
The order finds that, from at least October 2008 through April 2012, the defendants defrauded 22 individuals who contributed $1,416,000 to an investment pool operated by Crabapple to trade forex. In the course of soliciting investors, according to the order, the defendants’ statements to pool participants regarding the defendants’ forex trading performance were completely false. Christy misrepresented Crabapple’s trading performance history and experience and advertised regular monthly trading profits when, in fact, Crabapple had experienced consistent and significant losses, the order finds.
The order also finds that the defendants misappropriated most of the pool participants’ money. Christy treated Crabapple’s checking account as his personal piggy bank, using the money in the account for a variety of personal, business, and marketing expenses, even though the defendants told pool participants that their contributions would be used to trade forex, according to the order.
The defendants concealed their fraud by preparing and distributing false monthly account statements to pool participants and by making false statements and submitting false accounting records to the NFA in the course of an NFA examination, the order finds.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the 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.
FROM: COMMODITY FUTURES TRADING COMMISSION,
CFTC Orders Morgan Stanley Smith Barney LLC to Pay $200,000 for Supervision Violations
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges that Morgan Stanley Smith Barney LLC (the respondent), a futures commission merchant (FCM) based in Purchase, N.Y., violated CFTC regulation 166.3 by failing to diligently supervise its employees’ handing of customer accounts.
The CFTC order requires Morgan Stanley Smith Barney to pay a $200,000 civil monetary penalty and prohibits it from violating CFTC regulation 166.3, as charged.
According to the order, the respondent’s "Customer A" provided trust services for its clients. In the course of providing such services to one of its clients, the order finds that Customer A accepted orders to trade commodity futures contracts on behalf of its own third party client, accepted the third party client’s money to place those trades, and affected the trades via a contract market on the third party client’s behalf. These contracts were traded in a proprietary futures account in Customer A’s name carried initially at Citigroup Global Markets Inc. (CGMI), a registered FCM, and later in an account carried by the respondent, the order finds. Through these actions, Customer A acted as an FCM, without being registered as such, in violation of the Commodity Exchange Act (CEA), according to the order.
According to the order, from 2006 to 2008, Customer A conducted five transfers of funds from its proprietary commodity futures trading account to a third party client’s bank account. The fact that funds were moving from a proprietary trading account to a third party bank account should have led the respondent’s employees executing the transactions to question Customer A’s actions and to investigate to determine whether the account was being carried properly, the order finds.
However, the respondent’s employees failed to diligently investigate the suspicious transactions, according to the order.
No later than January 15, 2010, the respondent realized that Customer A’s proprietary futures trading account had been carried improperly since 2006, the order finds. Nonetheless, the respondent continued to allow trading on behalf of the third party client to take place in Customer A’s account in January 2010, March 2010, and May 2010, according to the order. The order finds that the third party client’s funds were ultimately moved from Customer A’s proprietary account to an account in the third party client’s name on or about May 27, 2010.
At the time of the above-described events, the respondent maintained an inadequate system of supervision and internal controls to detect and deter violations of the CEA and CFTC regulations, the order finds. Consequently, the respondent failed to diligently supervise the handling by its partners, officers, employees and agents relating to its business as a CFTC registrant, in violation of regulation 166.3, the order finds.
CFTC Division of Enforcement staff responsible for this case are Jason Mahoney, Timothy J. Mulreany, George Malas, Paul Hayeck, and Joan Manley.
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