The following is from the CFTC...
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil enforcement action in the U.S. District Court for the Southern District of New York against Arista LLC, a registered Commodity Pool Operator (CPO) with its principal place of business in Newport Coast, Calif., and its principals Abdul Sultan Walji (a/k/a Abdul Sultan Valji) and Reniero Francisco, both California residents. The CFTC complaint charges the defendants with defrauding investors in connection with operating a commodity pool to trade commodity futures contracts and options, making false statements to pool participants, misappropriating pool funds, and making false statements in filings with the National Futures Association (NFA). The CFTC complaint also charges the defendants with failing to register with the CFTC during Arista’s first year of operating as a CPO.
On December 12, 2012, the same day the complaint was filed, U.S. District Court Judge Paul A. Engelmayer entered an ex parte restraining order freezing the defendants' assets, authorizing expedited discovery by the CFTC, and prohibiting the defendants from destroying or concealing books and records. The judge set a hearing date on the CFTC’s motion for a preliminary injunction for December 21, 2012.
The CFTC complaint alleges that from at least February 2010 through January 2012, the defendants carried out a fraudulent scheme to misappropriate millions of dollars from investors in commodity futures and options. The defendants allegedly collected funds from 39 investors totaling more than $9.5 million, of which the defendants paid themselves $4.125 million in purported fees while losing over $4.8 million trading. In order to perpetuate their scheme, the defendants allegedly provided false quarterly statements to investors and filed false quarterly reports with the NFA. For example, the complaint alleges that the NFA, as a result of its examination, determined that Arista’s September 2011 pool quarterly report (PQR) had falsely reported a positive 99 percent rate of return in September 2011, when in reality Arista’s rate of return was negative 46.98 percent. NFA also determined that Arista’s PQR had falsely reported a net asset value (NAV) of $8,421,139 as of September 30, 2011, when in reality Arista’s NAV as of that date was approximately $523,000, according to the complaint.
In its continuing litigation, the CFTC seeks restitution and a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws, as charged.
In a parallel criminal action, on December 12, 2012, the U.S. Attorney’s Office for the Southern District of New York announced that it filed a criminal complaint charging both Walji and Francisco with conspiracy, securities fraud, and wire fraud offenses. Walji is also charged with commodities fraud. Both defendants were arrested in California by agents from the Federal Bureau of Investigation (FBI).
The CFTC appreciates the assistance of the U.S. Department of Justice, U.S. Attorney’s Office for the Southern District of New York, the FBI, and the NFA.
CFTC staff members responsible for this case are Michael P. Geiser, Laura A. Martin, Douglas K. Yatter, Philip D. Rix, Ricardo Smalls, Manal M. Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.