The Blotter: Corzine, O'Brien, MF Global finally charged by CFTC

Also: Florida firm hit with $5.8 million in fines for commodity pool fraud

The order stems from a CFTC Complaint filed on Sept. 27, 2011, charging ATG, Martinez, Bautista and Padua with solicitation fraud, issuing false account statements, and misappropriating pool participant funds, in connection with both futures and forex, and failing to register with the Commission in connection with futures activities, and also charging Gutierrez and Rodriguez with misappropriating pool participant funds 

 Illinois

Federal Court orders Christopher Varlesi to pay over $1.3 million to settle Ponzi scheme fraud and misappropriation action

The CFTC obtained a federal court order against defendant Christopher Varlesi of Chicago, individually and doing business as Gold Coast Futures and Forex, requiring him to pay restitution of more than $638,000 to defrauded investors and a $700,000 civil monetary penalty.  The consent oder of permanent injunction, entered June 12, 2013, by Judge James B. Zagel of the U.S. District Court for the Northern District of Illinois, also imposes permanent trading and registration bans against Varlesi and prohibits him from violating the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The order stems from a CFTC complaint filed March 7, 2012, charging Varlesi with fraudulently operating a commodity pool to trade commodity futures and off-exchange foreign currency (forex), making false statements to pool participants, misappropriating pool funds, and failing to register with the CFTC as a Commodity Pool Operator. 

The order finds that Varlesi solicited and accepted at least $1.7 million from at least 20 individuals to trade commodity futures and forex contracts by touting his past trading record and ability to profitably trade futures and forex contracts.  In exchange for their investment, Varlesi issued promissory notes to pool participants purportedly paying a fixed monthly interest rate on principal, according to the Order.  However, Varlesi used no more than $220,000 of the $1,716,169 that he accepted from pool participants to trade commodity futures and forex contracts, the order finds.  Varlesi spent misappropriated investor funds on business and personal expenses, including food, utilities, gas, life insurance, entertainment, travel, restaurants, his children’s tuition, and spa treatments and used approximately $1,343,471 to pay participants purported profits in the manner of a Ponzi scheme, according to the order.  

To perpetuate the fraud, Varlesi made false verbal representations and provided pool participants with fabricated account statements and false account performance documentation, showing that their investments were growing, according to the Order.  In fact, the order finds that Varlesi knew the representations, statements, and account performance documentation were false because he failed to disclose to pool participants that he had misappropriated a significant amount of the pool’s money.

In or around March 2011, Varlesi stopped making interest payments on the promissory notes and admitted to a pool participant that there was no money in his account, the Order finds.  Furthermore, despite subsequent promises to repay the pool participants, Varlesi has not done so and still owes 17 pool participants approximately $638,227, the order finds.

 North Carolina

CFTC charges C. David Wright with commodity pool fraud

On June 24, 2013, the CFTC filed a civil enforcement action charging C. David Wright of Iron Station, N.C., with operating a $1 million commodity pool Ponzi scheme and misappropriating participants’ funds.  Wright has never been registered with the CFTC.

The CFTC’s complaint, filed in the U.S. District Court for the Western District of North Carolina, charges Wright with soliciting over $1 million from individuals to participate in the fraudulent scheme from at least August 2008 through March 2013.  Although Wright told participants that their funds would be invested in a variety of investments, including commodity futures, he in fact misappropriated nearly all of the funds, using them to pay personal expenses and to make so-called profit payments to participants, as is typical of a Ponzi scheme.

In its continuing litigation, the CFTC seeks a permanent injunction from future violations of federal commodities laws, permanent registration and trading bans, restitution to defrauded pool participants, disgorgement of ill-gotten gains, and civil monetary penalties. 

 

<< Page 3 of 3
Comments
comments powered by Disqus