The Blotter: ABN AMRO fined $1 million for seg fund and minimum net cap violations

Broker lacked adequate supervision policies.

Puerto Rico

Federal court in Puerto Rico orders Angel F. Collazo, ACJ Capital, Inc., and Solid View Capital LLC to pay over $1.5 million to settle forex fraud charges in CFTC enforcement action

The CFTC announced that it obtained a federal court consent order requiring defendants Angel F. Collazo, formerly of Salinas, Puerto Rico, and his companies, ACJ Capital, Inc. (ACJ) and Solid View Capital LLC (Solid View), both of San Juan, Puerto Rico, jointly and severally to pay $843,444 in restitution and to pay a $750,000 civil monetary penalty for fraudulently soliciting customers to participate in an off-exchange leveraged foreign currency (forex) pool, misappropriating pool participant funds, and issuing false statements to conceal trading losses and misappropriation. 

The CFTC also obtained a second federal court consent order, requiring defendants Fernando Clemente, of Weston, Fla, and his company, Felgi Investments Corp. (Felgi) of Caguas, Puerto Rico, to pay $30,000 in restitution, to disgorge $120,933 in pool participant funds to which they were not legitimately entitled, and to pay a $120,000 civil monetary penalty. 

The Orders also impose permanent trading and registration bans against all defendants and prohibit them from violating the anti-fraud provisions of the CEA, as charged.  

The orders, entered by Judge Jose A. Fuste of the U.S. District Court for the District of Puerto Rico on Feb. 13, 2013 and June 10, 2013, respectively, stem from a CFTC complaint originally filed in February..  In July 2012, the CFTC complaint was amended to include defendants Clemente and Felgi.  Clemente and Felgi were also named as relief defendants for receiving funds from ACJ, Solid View, and Collazo to which they were not legitimately entitled. 

 The Feb. 13, 2013 order finds that Collazo and his companies fraudulently solicited commodity pool participants by falsely claiming profitable returns, while minimizing and failing to fully disclose the risks of trading leveraged forex.  The order also finds that Collazo, ACJ, and Solid View misappropriated pool funds to make payments to pool participants and for personal uses, failed to disclose their intended uses of pool participant funds, misrepresented the profitability of pool trading accounts, and distributed statements to ACJ and Solid View pool participants that contained false account values, including showing consistent trading profits. 

 The June 10, 2013 order finds that Clemente and Felgi, misappropriated $30,000 in customer funds that were to have been provided by Felgi to Solid View for personal uses and failed to disclose their intended uses of pool participant funds.  The order also finds that Clemente and Felgi retained $120,933 in purported trading profits to which they were not entitled.

North Carolina

CFTC charges North Carolina resident James A. Shepherd and James A. Shepherd, Inc. with commodity pool fraud

Defendants charged with fraudulently soliciting approximately $10 million from approximately 176 investors and misappropriating and commingling at least $4.45 million of the pool’s funds

The CFTC announced the filing of a civil enforcement complaint against James A. Shepherd (Shepherd) and James A. Shepherd Inc., a registered commodity pool operator, charging  them with fraudulently soliciting, accepting, and pooling approximately $10 million from approximately 176 individuals to invest in a commodity pool called the Shepherd Major Play Option Fund LP(Pool) for the purpose of trading options on futures contracts.  Shepherd allegedly misappropriated at least $4.45 million of the pool’s funds.

According to the CFTC’s complaint, Shepherd fraudulently told pool participants and prospective pool participants that their funds would be invested in on-exchange options on commodity futures and that the pool’s assets would not be commingled with the assets of any other entity.  Rather than trade funds as represented, defendants allegedly misappropriated a large portion of pool funds and commingled those funds with funds unrelated to the pool.  Beginning in 2006, Shepherd allegedly transferred a large portion of pool funds to: (i) Shepherd’s own bank account, for his own personal use and to repay other business obligations unrelated to the pool; (ii) futures and options trading accounts maintained in Shepherd’s own name, which suffered significant trading losses; and (iii) a bank account in the name of a separate hedge fund operated by Shepherd, which he used to pay redemptions to those hedge fund investors.

 The complaint further alleges that defendants concealed the fraud by distributing to pool participants periodic statements and annual certified financial statements that falsely represented the net asset value of the pool.  Defendants further concealed the fraud by forging bank statements and bank confirmations and making false statements to the Pool’s outside auditor and the NFA during the course of their respective audits, according to the complaint. 

In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the CEA as charged.

To see past regulatory actions, go to The Blotter

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