The Blotter: U.S. Bank hit with injunction due to PFG accounts

Also: Action against Banc de Binary and CFTC-SEC warning on binary option schemes

David Meister, the CFTC’s director of enforcement, said: “The Commodity Exchange Act and Commission rules protecting customer funds impose obligations on banks that hold those funds.  As should be apparent from today’s action, we will seek to hold a bank to account if it falls short on complying with customer fund protection obligations.  Wasendorf stole vast sums of customer money, but his crimes do not excuse U.S. Bank from its own independent responsibilities.”

According to the complaint, Wasendorf defrauded more than 24,000 Peregrine clients and misappropriated more than $215 million over two decades using a customer segregated account at U.S. Bank.  In connection with that fraud, Wasendorf misrepresented to the National Futures Association and to Peregrine’s auditor that Peregrine’s customer segregated account at U.S. Bank contained $200 million or more, when in fact the average balance since May 2005 was only $15.7 million.  On July 10, 2012, the CFTC instituted a civil action against Wasendorf and Peregrine, CFTC v. Peregrine Financial Group, Inc. and Russell Wasendorf Sr. Wasendorf also was criminally charged by the U.S. Attorney’s Office for the Northern District of Iowa, pled guilty, and on Jan. 23, 2013 was sentenced to 50 years in prison and ordered to pay more than $215 million in restitution. United States v. Russell Wasendorf, Sr.,

In this litigation, the CFTC seeks an injunction against U.S. Bank for further violations of the CEA and CFTC Regulations, restitution, disgorgement, and civil monetary penalties, among other appropriate relief. 

Utah


Federal court orders Utah residents Christopher D. Hales, Eric A. Richardson and their company Bentley Equities, LLC to pay more than $2.7 million in sanctions for fraud

 

The CFTC obtained federal court orders for more than $2.7 million in disgorgement and civil monetary penalties against Bentley Equities, LLC (Bentley), a Delaware corporation, and its principals, Christopher D. Hales (Hales) and Eric A. Richardson (Richardson), resolving the CFTC’s May 2, 2012 complaint charging them with fraud.  Hales is currently an inmate at the Federal Correctional Institution in Safford, Arizona, and Richardson is currently an inmate at the Florence Federal Correction Complex in Florence, Col..

On May 31, 2013, the Honorable Dee Benson of the U.S. District Court for the District of Utah, Central Division, entered a consent order for permanent injunction against Richardson requiring him to pay $100,000 in disgorgement and a $150,000 civil monetary penalty.  That order also permanently bans Richardson from engaging in any commodity-related activity, including trading and registering with the CFTC, and prohibits him from violating the anti-fraud provisions of the CEA, as charged.  On May 14, 2013, Judge Benson also entered an order for default judgment and permanent injunction against Hales and Bentley that requires Hales to pay $382,080 in disgorgement and $1,146,240 in civil monetary penalties and Bentley to pay an $840,000 civil monetary penalty.  That order also permanently bans Hales and Bentley from engaging in any commodity-related activity, including trading and registering with the CFTC, and prohibits them from violating the anti-fraud provisions of the CEA.

The CFTC’s 2012 enforcement action against Hales, Richardson and Bentley charged them with fraudulently soliciting and accepting more than $1.1 million from approximately 39 customers for the purpose of trading commodity futures.  It also alleged that they misappropriated approximately $658,452 of customer funds for personal expenses including auto expenses, utility bills and credit card payments and to make payments to existing customers in the manner of a Ponzi scheme.  The complaint further alleged that Hales, Richardson and Bentley misrepresented to customers that their trading was profitable, when in reality, they lost more than $482,000 trading commodity futures and that Hales and Bentley issued false statements to certain customers.

In related criminal prosecutions, Hales was sentenced to more than seven years imprisonment and ordered to pay $12,719,236 in criminal restitution in connection with a judgment entered against him in United States v. Christopher D. Hales, No.2:10-CR-183-TS-SA-1 (C. D. UT, Sept. 2, 2010) and Richardson was sentenced to a year and a day imprisonment and ordered to pay $110,000 in criminal restitution in connection with a judgment entered against him in United States v. Eric A. Richardson.

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