COURT ORDERS DEFENDANTS TO PAY $16 MILLION IN CFTC FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Obtains Default Judgment against Altamont Global Partners LLC and John G. Wilkins for Commodity Pool Fraud, Misappropriation, and Making False Statements to National Futures Association

U.S. District Court in Florida Orders Defendants to Pay More than $15.8 Million in CFTC Anti-Fraud Action

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida entered a default judgment and permanent injunction Order against Defendants Altamont Global Partners LLC (AGP) of Longwood, Florida, and its owner, John G. Wilkins, formerly of Chuluota, Florida. The Order requires AGP to pay $10,969,843 in disgorgement and Wilkins to pay $1,214,902 in disgorgement and a $3,644,706 civil monetary penalty. The Order also imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act and a CFTC regulation, as charged.

The court’s Order, entered on February 20, 2014, stems from a CFTC Complaint filed on July 16, 2012 against AGP and Wilkins, as well as Defendants Philip Leon and Paul Rangel (see CFTC Press Release 6315-12). The Order confirmed and adopted U.S. Magistrate Judge Thomas B. Smith’s Report and Recommendation of January 31, 2014, which stated that from approximately March 2009 to at least June 22, 2012, AGP and Wilkins operated a fraudulent scheme that solicited at least $13 million from approximately 198 commodity pool participants to trade, among other things, commodity futures contracts, options on futures, and off-exchange foreign currency contracts.

The Order states that AGP and Wilkins, along with the other Defendants, misappropriated more than $5.2 million of pool participants’ funds in “loans” and “advances” to Defendants, which were sham transactions designed to disguise Defendants’ misappropriation, and issued false statements to pool participants regarding the profitability and value of their accounts. In addition, the Order states that AGP and Wilkins provided false information and documentation to the National Futures Association (NFA).

CFTC Previously Settled with Defendants Leon and Rangel

Previously, on December 17, 2013, the court entered consent Orders of permanent injunction against Defendants Leon and Rangel, requiring them to pay a combined total of over $8 million in disgorgement and civil monetary penalties, among other sanctions, to settle the CFTC action (see CFTC Press Release 6797-13).

With the entry of the Order against AGP and Wilkins, the CFTC’s litigation is concluded; however, the court-appointed receiver, Mark Silverio, continues his efforts to marshal and distribute Defendants’ assets to their fraud victims.

A Related Criminal Action

In a related criminal action, on August 22, 2013, Wilkins pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud (see United States v. Wilkins, No. 13-cr-181 (M.D. Fla. July 19, 2013)). Wilkins was sentenced to 108 months in federal prison and ordered to pay $17,042,026.89 in restitution, jointly and severally with defendant Leon, who received the same prison sentence.

The CFTC thanks the NFA for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Peter Riggs, Stephen Turley, Charles Marvine, Rick Glaser, and Richard Wagner.

* * * * * *

CFTC’s Commodity Pool Fraud Advisory

DEFENDANTS IN FOREX FRAUD CASE TO PAY $907,000

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Obtains Permanent Injunction Orders and Monetary Sanctions against Susan G. Davis, David E. Howard II, and Joseph Burgos for Fraudulent Solicitation of Managed Foreign Currency Trading Accounts

Court orders Defendants to pay nearly $907,600 in equitable relief and a monetary sanction and permanently bars them from the commodities industry

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered Consent Orders for permanent injunction against Defendants Susan G. Davis of Jersey City, N.J. and David E. Howard II of New York, N.Y., and a Supplemental Order assessing monetary damages against Defendant Joseph Burgos of Rutherford, N.J. Previously, on October 29, 2013, the court entered a permanent injunction Order against Burgos that imposed permanent trading and registration bans against him. The court’s Orders require Davis, Howard, and Burgos jointly and severally to pay restitution of $407,599.87 for the benefit of defrauded customers and a $500,000 civil monetary penalty, with Davis’s and Howard’s individual liability for the civil monetary penalty limited to $250,000. The Orders also impose permanent trading and registration bans against Davis and Howard and prohibit them from violating the Commodity Exchange Act and CFTC regulations, as charged.

The court’s Orders, entered on February 26, 2014, stem from a CFTC anti-fraud enforcement action filed on July 27, 2011 against Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J., and Davis and Howard, principals of Forex Group and Forex Partners, and Burgos, principal of Highland Stone (see CFTC Press Release 6083-11). The court entered a default judgment against the three companies on November 30, 2012, which ordered them to pay $450,764 for the benefit of defrauded customers and assessed a civil monetary penalty against them of three times that amount, $1,352,293 (see CFTC Press Release 6444-12).

The court’s Orders find that Davis, Howard, and Burgos fraudulently solicited 106 customers, who invested almost $2.9 million to trade foreign currency (forex) through accounts that the Defendants managed at one of two foreign retail forex dealers. In soliciting customers, Defendants falsely claimed on their websites and elsewhere that profits had been made for their customers for a period of several years, including, for example, a false reported gain of 51.94 percent in 2010 when, in fact, their customers lost more than $1.2 million that year. In the end, their customers ended up losing more than 93 percent of their overall invested principal through forex trading, according to the Orders. The court’s Orders also find that the Defendants distributed falsified account statements showing profitable trading to prospective customers. In addition, the court found that Davis, Howard, and Burgos acted in capacities requiring registration with the CFTC, but were not registered.

The CFTC appreciates the assistance of the U.K.’s Financial Conduct Authority.

CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

* * * * * *

CFTC’s Foreign Currency (Forex) Fraud Advisory

SEC OBTAINS WIN IN PENNY STOCK FRAUD CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Obtains Summary Judgment Win On Liability Against All Defendants in a Penny Stock Fraud Case

On February 19, 2014, the United States District Court for the Northern District of New York in Albany, New York granted the Securities and Exchange Commission's motion for summary judgment on liability against all defendants, StratoComm Corporation; its CEO Roger D. Shearer; and its former Director of Investor Relations, Craig Danzig, on all charges against them, including violations of the antifraud provisions and registration requirements of the federal securities laws.

The SEC alleged that StratoComm, acting at Shearer's direction and with Danzig's assistance, issued and distributed public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC argued that StratoComm, Shearer and Danzig sold investors more than $4 million worth of StratoComm stock in unregistered transactions. The SEC also alleged that Shearer used much of that money for his own purposes, including to help pay restitution he owed in connection with his guilty plea in a prior criminal proceeding.

In granting summary judgment in favor of the SEC, the court found that StratoComm violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court also found that Shearer violated Sections 5(a) and 5(c) of the Securities Act, aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and found him liable as a control person for StratoComm's violations. Finally, the court found that Danzig violated Sections 5(a), 5(c), and 17(a) of the Securities Act, violated Section 15(a) of the Exchange Act, and aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Statement on Proposed SEC Budget for Fiscal 2015

Statement on Proposed SEC Budget for Fiscal 2015

COURT ORDERS ARIZONA MAN TO PAY OVER $1.2 MILLION STEMMING FROM SOLICITATION FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court Orders Arizona Resident Ray Thomas Brown to Pay over $1.2 Million for Solicitation Fraud and Misappropriation in Operating Two Commodity Scams

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Frederick J. Martone of the U.S. District Court for the District of Arizona granted the CFTC’s motion for summary judgment and entered an Order of permanent injunction against Defendant Ray Thomas Brown, of Phoenix, Arizona. The Order imposes permanent trading and registration bans against Brown and requires him to pay restitution and disgorgement totaling $1,131,941.98 and a civil monetary penalty of $140,000.

The Order stems from a CFTC Complaint filed on November 26, 2012 (see CFTC Press Release 6448-12, December 6, 2012), charging Brown with fraud, misappropriation, and registration violations in operating two scams, one involving fraud while acting as a Commodity Pool Operator (CPO) and the other involving fraud while acting as a Commodity Trading Advisor (CTA). Brown duped customers into sending at least $1.2 million to bank and trading accounts under his control, according to the Complaint. The CFTC Complaint also charged Brown with illegally operating as an unregistered CPO and CTA.

The Order finds that Brown fraudulently solicited approximately $1,163,519 from more than 200 individuals. Of that amount, Brown deposited only approximately $86,000 into commodity pool trading accounts, which was promptly lost in trading. The Order also finds that Brown used the bulk of the funds he solicited on personal expenses and to further his fraudulent scheme. In making his solicitations, Brown lied about his background, fabricated his past and present investment performance, disseminated false account statements, and failed to disclose that he was not registered with the CFTC in any capacity, according to the Order.

A Related Criminal Action

In a related criminal action, Brown pleaded guilty on May 7, 2013, to wire fraud. Brown is currently awaiting sentencing (United States v. Ray Thomas Brown, Case No. 8:13-cr-00035-UA (United States District Court for the Central District of California)).

The CFTC thanks the United States Attorney’s Office for the Central District of California, the Federal Bureau of Investigation, the Black Mountain Precinct of the Phoenix Police Department, and the Arizona Corporation Commission for their assistance and cooperation on this matter.

CFTC Division of Enforcement staff members responsible for this case are Dmitriy Vilenskiy, Jonathan Robell, Richard Foelber, Paul Hayeck, and Joan Manley.

SEC ALLEGES FORMER REGISTERED REPRESENTATIVE STOLE FROM INVESTOR'S ACCOUNT

FROM:  SECURITIES AND EXCHANGE COMMISSION
SEC Charges Former Registered Representative with Fraud

The Securities and Exchange Commission has charged Kevin P. O'Brien (O'Brien), a former registered representative, with fraud in connection with the misappropriation of over $298,000 from the account of a customer between 1998 and 2008. O'Brien has agreed to settle the charges, without admitting or denying the allegations in the Commission's complaint.

The Commission's complaint, filed February 21, 2014, in the U.S. District Court for the Southern District of Ohio, alleges that, from at least 1998 through August 2008, while working as a registered representative, O'Brien engaged in a fraudulent scheme to misappropriate money from a customer. The complaint alleges that O'Brien caused checks to be issued in the customer's name from the customer's account, picked up the checks from a post office box that he controlled, and deposited them into a bank account in the customer's name. The complaint further alleges that O'Brien withdrew the money from his customer's bank account, which O'Brien had the ability to control, and used the money for personal expenses unrelated to the customer.

O'Brien has consented to the entry of a final judgment that permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The final judgment also orders disgorgement of $298,917, plus prejudgment interest of $54,020, but waives the payment of all disgorgement and all prejudgment interest based upon O'Brien's inability to pay. The Commission also did not seek a civil money penalty based upon O'Brien's inability to pay.