Jump to navigation

Free Newsletter Modern Trader Follow

Main menu

  • Futures
    • Modern Trader Magazine
    • Commodities
    • Futures Mag Archives
    • ETFs
    • Financials
    • Forex
    • Managed Funds
    • Market Analysis
    • News
    • Options
    • Regulation
    • Technology
    • Trading Strategies
    • Education
    • Futures Op-Ed
  • Favorites
    • Alpha Pages Most Popular
    • Futures Magazine
    • Modern Trader Magazine
    • Most Popular
    • Slideshows & Lists
    • Special Topics
      • Alpha Hunters
      • Bad Boys
      • FINtech
      • High-Frequency Trading
      • Trader's Life
      • Trading Strategies
      • FUTURES MAG's 500th ISSUE
      • We asked traders
  • Traders
    • Market Data
    • Hot Charts
    • Interactive Charts
    • Trading Calendar
  • FINalternatives
  • Hard Assets
    • Home
    • Base Metals
    • Precious Metals
    • Rare Earth Metals
    • Commodities
    • Mining Investments
    • Slideshows
  • Modern Trader
    • Subscribe
    • Past Issues
  • All +
    • Follow Us +
      • FuturesMag
      • Newsletters
      • Facebook
      • Google+
      • Linkedin
      • Twitter
      • RSS Feeds
    • About Us +
      • About
      • Advertise
      • Contact
      • Contribute
      • Privacy Policy
  • !
Follow Futures          
       
more >>

We Asked Traders

We asked traders for their opinion on the launch of bitcoin futures

Sponsored Content

Trading

Equities.com launches unlimited trading via Tradier Brokerage, Transforming into a news & fintech portal

Featured Topics

more Commodities>>

Commodities

Energy demand steps back in play
Advertisement
more Volatility>>

Volatility

Volatility & opportunity in the energy sector
more Financials>>

Financials

Daily Price Action: E-mini S&P 500
more Options>>

Options

Trading Vertical Option Spreads

Advertisement

SEC charges Chicago father, son in cherry-picking scheme

$2 million in illicit profits alleged

By Press Release

May 16, 2013 • Reprints

The following is from the SEC...

The Securities and Exchange Commission today charged a father and son and their Chicago-area investment advisory firm with defrauding clients through a cherry-picking scheme that garnered them nearly $2 million in illicit profits, which they spent on luxury homes, vehicles, and vacations.

The SEC alleges that Charles J. Dushek and his son Charles S. Dushek placed millions of dollars in securities trades without designating in advance whether they were trading personal funds or client funds. They delayed allocating the trades so they could cherry pick winning trades for their personal accounts and dump losing trades on the accounts of unwitting clients at Capital Management Associates (CMA). Lisle, Ill.-based CMA misrepresented the firm’s proprietary trading activities to clients, many of whom were senior citizens.

“The Dusheks and their firm had an obligation to treat clients fairly and honestly,” said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. “Instead, they exploited the trade allocation process to enrich themselves at the expense of their clients.”

According to the SEC’s complaint filed in federal court in Chicago, the scheme lasted from 2008 to 2012. During that period, the Dusheks made more than 13,500 purchases of securities totaling more than $350 million. The Dusheks typically waited to allocate the trades for at least one trading day – and often several days – by which time they knew whether the trades were profitable. The Dusheks ultimately kept most of the winning trades and assigned most of the losses to clients. At the time of the trading, they did not keep any written record of whether they were trading client funds or personal funds.

The Dusheks’ extraordinary trading success reflects the breadth of their scheme. For 17 consecutive quarters, the Dusheks reaped positive returns at the time of allocation while their clients suffered negative returns. One of Dushek Sr.’s personal accounts increased in value by almost 25,000 percent from 2008 to 2011 while many of his clients’ accounts decreased in value.

The illicit trading profits from his personal accounts were Dushek Sr.’s only source of regular income outside of Social Security, according to the SEC. It alleges that he drew no salary or other compensation as president of CMA and relied on profits from the scheme to make mortgage payments on his 6,500 square foot luxury home featuring separate equestrian facilities. He also spent the money on luxury vehicles including a Mercedes Benz SL550, membership in a luxury vacation resort, and vacations abroad. Dushek Jr. is alleged to have used trading profits to pay for a boat slip and vacations to ski resorts and Hawaii.

According to the SEC’s complaint, CMA misrepresented its proprietary trading activities to clients in a brochure that is part of the firm’s Form ADV. The brochure falsely claimed that Dushek Sr. maintained “reports” of his proprietary trading activities that he submitted to an associate for review, when he did not maintain such reports nor have any associate review his trading. The brochure further stated, “We do not merge or aggregate any client order with any employee order.” That claim also was false. When the Dusheks placed orders, there were no client orders or employee orders but instead merely block purchases in CMA’s brokerage accounts that were later allocated to client accounts or personal accounts.

The SEC’s complaint charges the Dusheks and CMA with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.

The SEC’s investigation was conducted by Nicholas Eichenseer, Vanessa Horton, and Paul Montoya of the Chicago Regional Office. Steven Seeger will lead the SEC’s litigation.

About the Author

Related Articles
Daily Price Action: E-mini S&P 500
GBP/USD drops as weak CPI reduces BoE May rate rise odds
Daily Price Action: E-mini S&P 500
Daily Price Action: E-mini S&P 500
Daily Price Action: E-mini S&P 500
Previous
Federal court orders Floridian to pay $28.4 million in Ponzi case
Next
Velocity achieved in U.S. as growth for two years seen in poll
Related Terms
U.S. Securities and Exchange Commission 958Securities and Exchange Commission 905Illinois 599SEC 318Hawaii 43Chicago 33Chicago Regional Office 7Merri Jo Gillette 4Vanessa Horton 2Paul Montoya 2dushek 1cherry-picking 1Capital Management Associates 1Steven Seeger 1Charles S. Dushek 1Dushek Sr. 1Nicholas Eichenseer 1Charles J. Dushek 1

Free Newsletter Modern Trader Follow

Main menu

  • Futures
    • Modern Trader Magazine
    • Commodities
    • Futures Mag Archives
    • ETFs
    • Financials
    • Forex
    • Managed Funds
    • Market Analysis
    • News
    • Options
    • Regulation
    • Technology
    • Trading Strategies
    • Education
    • Futures Op-Ed
  • Favorites
    • Alpha Pages Most Popular
    • Futures Magazine
    • Modern Trader Magazine
    • Most Popular
    • Slideshows & Lists
    • Special Topics
      • Alpha Hunters
      • Bad Boys
      • FINtech
      • High-Frequency Trading
      • Trader's Life
      • Trading Strategies
      • FUTURES MAG's 500th ISSUE
      • We asked traders
  • Traders
    • Market Data
    • Hot Charts
    • Interactive Charts
    • Trading Calendar
  • FINalternatives
  • Hard Assets
    • Home
    • Base Metals
    • Precious Metals
    • Rare Earth Metals
    • Commodities
    • Mining Investments
    • Slideshows
  • Modern Trader
    • Subscribe
    • Past Issues
  • All +
    • Follow Us +
      • FuturesMag
      • Newsletters
      • Facebook
      • Google+
      • Linkedin
      • Twitter
      • RSS Feeds
    • About Us +
      • About
      • Advertise
      • Contact
      • Contribute
      • Privacy Policy
  • !
images