Florida
Federal court in Florida orders Philip Milton and Trade, LLC, and four relief defendants to pay millions in restitution, disgorgement, and civil monetary penalties for operating a $28.4 million Ponzi scheme
May 16, 2013 The Commodity Futures Trading Commission (CFTC) today announced that Judge Daniel Hurley of the U.S. District Court for the Southern District of Florida entered supplemental consent orders against defendants Philip Milton of Palm Beach Gardens, Florida, and Trade, LLC, based in Palm Spring Gardens, Florida, requiring Milton to pay restitution of more than $10.8 million and a $7.6 civil monetary penalty and Trade, LLC, to pay restitution of over $11.4 million and a $28.4 million civil monetary penalty for operating a multi-million dollar Ponzi commodity pool.
The court also required relief defendants BD, LLC, CMJ Capital, LLC, Center Richmond, LLC, and TWTT, LLC, all Florida corporations, to disgorge $545,200, $2,826,981.37, $1,253,862.62, and $100,000, respectively.
The CFTC filed a complaint against defendants Philip Milton, William Center, Gregory Center, and Trade, LLC on June 22, 2010, in the U.S. District Court for the Southern District of Florida. The complaint charged the defendants with fraudulently soliciting approximately $28.4 million from at least 2,000 customers to participate in a commodity pool to trade futures and securities and with misappropriating at least $9.6 million of pool funds for their personal use and to continue the scam. The complaint also named the four relief defendants, all corporations owned by the individual defendants, for receiving funds as a result of the defendants’ misappropriation to which they have no legitimate entitlement.
On, April 15, 2011, the court entered a consent order of permanent injunction against Milton and entered a similar consent order against Trade, LLC and the relief defendants on September 6, 2011. These consent Orders found the consenting parties liable for the fraud and misappropriation, as charged in the CFTC’s complaint, and ordered them to pay restitution, disgorgement, and civil monetary penalties in amounts to be determined at a later day. The CFTC’s litigation continues against Defendants William Center and Gregory Center.
Georgia
CFTC revokes registrations of Georgia resident Robert A. Christy and his company, Crabapple Capital Group LLC
May 20, 2013 The Commodity Futures Trading Commission (CFTC) today announced the revocation of the registrations of Robert A. Christy of Milton, Georgia, and his company, Crabapple Capital Group LLC (Crabapple) of Alpharetta, Georgia. Crabapple was registered with the CFTC as a commodity pool operator and commodity trading advisor, and Christy was registered as an associated person of Crabapple and listed as its sole principal.
On April 16, 2013, the CFTC judgment officer issued an initial decision on default against Christy and Crabapple finding that they were statutorily disqualified from CFTC registration based on the consent Order of permanent injunction entered by the U.S. District Court for the Northern District of Georgia on October 16, 2012. The court’s Order, among other things, (1) finds that Christy and Crabapple violated the Commodity Exchange Act (CEA) and CFTC regulations by engaging in fraud and misappropriation in connection with their operation of a Ponzi scheme, (2) permanently enjoins Christy and Crabapple from engaging in fraudulent conduct in violation of specified provisions of the CEA and CFTC Regulations, and (3) prohibits Christy and Crabapple from acting in any capacity requiring registration or acting as a principal or agent of a registrant. On May 16, 2013, the judgment officer’s initial decision became the order of the commission.
New York
Federal court orders Spencer Montgomery, Brian Reynolds, Arjent Capital Markets LLC, and Chicago Trading Managers LLC to pay more than $1.8 million for commodity pool fraud
May 16, 2013 The Commodity Futures Trading Commission (CFTC) today announced that Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York entered a consent judgment and permanent injunction order against defendants Spencer Montgomery and Brian Reynolds, and a default judgment and permanent injunction order against defendants Arjent Capital Markets LLC (Arjent) and Chicago Trading Managers LLC (CT Managers), for defrauding pool participants by knowingly issuing or causing to be issued false account statements for commodity pools. The orders require Montgomery and Reynolds each to pay a $140,000 civil monetary penalty, Arjent and CT Managers jointly to pay a $1.4 million civil monetary penalty, and Arjent to pay an additional $140,000 civil monetary penalty. The Orders further impose permanent trading and registration bans on all the defendants and prohibit them from violating the Commodity Exchange Act (CEA), as charged.
The court’s orders, entered March 19, 2013 and May 15, 2013, respectively, stem from a CFTC complaint filed on March 13, 2012, that charged the defendants with violating the CEA’s anti-fraud provisions.
The orders find that from at least June 2008 through at least November 2009, Arjent, CT Managers, Montgomery, and Reynolds defrauded commodity pool investors who had invested approximately $10.5 million. CT Managers, Montgomery, and Reynolds knowingly issued and/or causing to be issued false account statements for two commodity pools, which Arjent aided and abetted, while Arjent, Montgomery, and Reynolds knowingly issued or caused to be issued a false account statement for a third commodity pool, the orders find. Additionally, the orders find that the defendants knew that certain debits were being held in the same account as the commodity pools’ assets and that those debits depleted the commodity pools’ assets. Nonetheless, the orders find that Arjent, CT Managers, Montgomery, and Reynolds issued or caused to be issued account statements that did not reflect the dilution of the commodity pools’ assets by these debits.
California
CFTC orders MB Trading Futures Inc., a registered retail foreign exchange dealer, to pay $200,000 penalty to settle charges of violating minimal financial requirement rules
May 14, 2013 The Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges against MB Trading Futures Inc. (MB Trading), a registered retail foreign exchange dealer (RFED) of El Segundo, California, for failing to comply with minimum financial requirements for registered RFEDs and futures commission merchants (FCMs) that offer or engage in retail off-exchange foreign currency (forex) transactions. MB Trading has been registered with the CFTC as an FCM since February 28, 2006 and as an RFED since September 9, 2010.
Effective October 18, 2010, the CFTC adopted comprehensive new rules to protect individual investors that buy forex contracts from, or sell forex contracts to, forex firms. Under these rules, RFEDs and FCMs that offer or engage in retail forex transactions must at all times maintain adjusted net capital of $20 million, or more in some circumstances, and hold enough assets to meet or exceed their total retail forex obligations to customers. The new rules impose several restrictions on the types of funds that firms can include in their adjusted net capital and asset computations.
According to the CFTC Order, for more than 16 months after adoption of the new rules, between October 18, 2010 and March 1, 2012, MB Trading improperly included certain funds held in four accounts in its adjusted net capital computations. After excluding those funds as required, the Order finds that MB Trading failed to meet its adjusted net capital requirements for 456 calendar days between October 18, 2010 and March 1, 2012.
During the same period, MB Trading also improperly included certain funds held in two of the same accounts, along with funds held in a third account, in its asset computations, according to the order. After excluding those funds as required, the order finds that MB Trading failed to hold enough assets to meet or exceed its total retail forex obligation to customers for 501 calendar days between October 18, 2010 and March 1, 2012.
Had these funds properly qualified under the regulations, MB Trading would have complied with its adjusted net capital and asset requirements, according to the order.
The CFTC order imposes a $200,000 civil monetary penalty and a cease and desist order on MB Trading for these violations. The order notes that in settling this matter, the CFTC took into account MB Trading’s cooperation and the corrective action it undertook after its deficiencies were discovered.
Florida
CFTC charges Global Precious Metals Trading Company and Michael Ghaemi of Coral Gables, Florida with fraudulent precious metals scheme
May 13, 2013 The Commodity Futures Trading Commission (CFTC) today filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against defendants Global Precious Metals Trading Company, LLC (GPMT) of Coral Gables, Florida, and its owner Michael Ghaemi, who resides in Miami, Florida. The CFTC’s Complaint charges that, since July 2011, the Defendants solicited and accepted more than $800,000 from approximately nine U.S. customers in connection with illegal off-exchange retail commodity transactions and then misappropriated virtually all of the customers’ funds.
According to the CFTC complaint, the defendants claimed to purchase and store physical metal, including gold, silver, platinum, and palladium, for customers. Defendants told customers that the minimum investment to purchase physical metal was $25,000, and that the customers would finance the remaining amount of the total value of the physical metals purchased through a loan which GPMT would arrange.
These claims were false, according to the complaint. Instead of purchasing, storing, or financing the purchase of physical metals, the defendants misappropriated the customers’ funds and used the funds for Ghaemi’s benefit, including to make car payments, pay Ghaemi’s salary, pay for Ghaemi’s travel and entertainment expenses,. and to margin their own speculative metals trading account in London. According to the complaint, the defendants have returned less than $65,000 of the over $800,000 obtained from customers and misappropriated the remaining funds.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010, which expanded the CFTC’s jurisdiction over retail commodity transactions like these, prohibits fraud in connection with such transactions, and requires that these transactions be executed on or subject to the rules of a board of trade, exchange, or contract market, according to the Complaint.
CFTC’s Precious Metals Fraud Advisory
In January 2012, the CFTC issued a Precious Metals Consumer Fraud Advisory to alert customers to precious metals fraud. The advisory stated that the CFTC had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s advisory specifically warns that frequently companies do not purchase any physical metals for the customer, but instead simply keep the customer’s funds, and further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.
In its continuing litigation against the defendants, the CFTC is seeking preliminary and permanent civil injunctions in addition to other remedial relief, including restitution to customers.
Ohio
Federal court orders Kevin and Keelan Harris, Karen Starr, and their companies, Complete Developments, LLC and Investment International Inc, to pay over $23 million for fraud in foreign currency Ponzi scheme
May 13, 2013 The Commodity Futures Trading Commission (CFTC) obtained a federal court judgment requiring defendants Kevin Harris, Keelan Harris, Complete Developments, LLC (CDL), and Investment International Inc. (a/k/a/ I3), all of Warren, Ohio, and Karen Starr of Barrie, Ontario, Canada, collectively to pay restitution and civil monetary penalties of over $23 million for solicitation fraud and misappropriation in connection with operating a multi-million dollar off-exchange foreign currency (forex) Ponzi scheme.
Judge David D. Dowd, Jr. of the U.S. District Court for the Northern District of Ohio entered the default Judgment and memorandum opinion on May 8, 2013, requiring CDL, I3, Kevin Harris, Keelan Harris, and Karen Starr to pay over $15.7 million in restitution to defrauded investors. The judgment also imposes civil monetary penalties of $2.49 million on Kevin Harris, $2.49 million on Keelan Harris, and $2.64 million on Starr and permanently bans them, CDL, and I3 from trading and registering with the CFTC and from violating anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.
The Court’s memorandum opinion finds that CDL, I3, Kevin Harris, and Starr violated anti-fraud provisions of the CEA by fraudulently soliciting customers to trade forex and misappropriating customer funds. The opinion further finds that, from about November 2006 until October 2008, CDL and I3 fraudulently solicited and accepted funds from customers seeking to open “professionally managed” forex trading accounts and that customers invested more than $23 million. Rather than trading forex on their customers’ behalf, the Opinion finds that CDL and I3 operated as a Ponzi scheme and used customers’ money to make payments to other customers and for Kevin Harris, Keelan Harris, and Starr’s own personal use. The opinion also finds that Kevin Harris, Keelan Harris, and Star controlled CDL and I3 and are liable for CDL and I3’s fraudulent conduct.
Relief defendants ordered to disgorge over $1 million of ill-gotten gains to investors
The judgment orders relief defendants Majestic Enterprises Collision Repair, Inc. and UCAN Overseas Corporation S.A. to disgorge $302,277 and $768,000, respectively, consisting of customers funds that they received, but are not entitled to, as a result of the defendants’ fraudulent conduct. The amounts disgorged are to be applied to the restitution ordered for CDL and I3 customers, according to the judgment.
