Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today charged System Capital, LLC of Lake Oswego, Ore., a registered Commodity Trading Advisor, and its founder and principal, Joshua Wallace of Tigard, Ore., a registered Associated Person, with solicitation fraud and making false statements to the National Futures Association (NFA).
The CFTC complaint, filed in the U.S. District Court for the Southern District of New York, alleges that System Capital and Wallace fraudulently solicited customers to trade commodity futures contracts by using a fabricated trading history and making false claims concerning the profitability of their commodity futures trading business and the amount of assets under management.
Specifically, the CFTC complaint alleges that the defendants represented to prospective and actual clients that Wallace had a successful 10-year history of trading the E-Mini S&P 500 futures contract in his proprietary account and that this successful trading continued after Wallace formed System Capital. The defendants also claimed that System Capital had assets of at least $28 million under management. However, none of this information was true, as it was fabricated by Wallace, and the defendants had no such trading history prior to their solicitations, according to the complaint.
As a result of these fraudulent solicitations, System Capital and Wallace allegedly retained at least 17 clients, managed approximately $3.5 million of client funds and directed the trading of client’s commodity futures accounts.
The complaint also alleges that Wallace knowingly provided false information and documents to the NFA. During an NFA audit in May 2010, Wallace is alleged to have repeatedly made false statements to NFA’s auditors regarding 1) System Capital’s promotional materials and other documents used to solicit clients and 2) a forged report purportedly authored by a major accounting firm regarding System Capital’s trading history.
In its continuing litigation, the CFTC seeks rescission of all contracts and agreements, full restitution to defrauded clients, a return of ill-gotten gains, civil monetary penalties, permanent registration and trading bans and a permanent injunction prohibiting further violations of the federal commodities laws.
The CFTC appreciates the assistance of the NFA, the Federal Bureau of Investigation and the U. S. Attorney’s Office for the Southern District of New York.
The CFTC Division of Enforcement staff members responsible for this case are Mark A. Picard, Elizabeth C. Brennan, Philip Rix, Steven Ringer, Lenel Hickson and Stephen J. Obie.