The Blotter: CFTC cracks down on commodity pools

Regulatory actions taken this week:

California

CFTC obtains default judgment and permanent injunction against Michael J. Leighton for defrauding commodity pool participants

Court orders Leighton to Pay over $2.3 Million in sanctions and restitution and permanently bars him from the commodities industry

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Philip S. Gutierrez of the U.S. District Court for the Central District of California entered an order of default judgment and permanent injunction against Michael J. Leighton of Torrance, Ca.  The order, entered on July 8, 2013, stems from a CFTC enforcement action filed on May 8, 2012 charging Leighton with solicitation fraud and issuing false statements in connection with the operation of a commodity trading pool.

The order requires Leighton to pay $1,650,230 in restitution to defrauded pool participants and a $700,000 civil monetary penalty.  It also permanently enjoins Leighton from violating the anti-fraud provisions of the Commodity Exchange Act (CEA) and commission regulations, as charged, and permanently bans Leighton from trading or engaging in activity requiring registration with the CFTC.

The order finds that Leighton defrauded and deceived at least 48 pool participants who invested at least $1.65 million in a commodity pool he operated from at least July 2008 to March 2012.  The order also finds that Leighton willfully or recklessly misrepresented to pool participants and prospective participants that he was a successful trader and that his pool was profitable.  It further finds that Leighton lost over $1.3 million of pool participant funds through trading.  Leighton did not disclose those loses and, instead, issued false written statements to pool participants misrepresenting the profitability and value of their respective shares of the Leighton pool.  The order further finds that Leighton falsely represented that the National Futures Association (NFA) and CME Group, Inc. were conducting an audit or review of the pool that prevented him from making any distributions or cash withdrawals to pool participants.  The order additionally finds that, in fact, no such audits or reviews occurred and that Leighton also created and distributed a fabricated document that purported to be an audit report issued by the NFA. 

In a related criminal action filed on May 9, 2012, the U.S. Attorney’s Office for the Central District of California  charged Leighton with one count of commodities.  Leighton entered a guilty plea in the related criminal action on July 11, 2012, and was sentenced to 60 months imprisonment on March 4, 2013. 

 

Texas

CFTC charges RFF GP, KGW Capital Management,  and Kevin G. White with commodity pool fraud

The CFTC announced that the U.S. District Court for the Eastern District of Texas entered an emergency order freezing and preserving the remaining pool participants’ assets under the control of defendants RFF GP, LLC (RFF GP), KGW Capital Management, LLC (KGW Capital), and Kevin G. White, and Relief Defendants Revelation Forex Fund, LPMeridian Propane LP, and W Corporate Real Estate, LP (d/b/a KGW Real Estate), all of Plano, Texas.  The order also prohibits defendants and relief defendants from destroying books and records, grants the CFTC immediate access to those records, and appoints a temporary receiver to protect pool participants’ funds. 

 The Order arises out of a civil enforcement complaint filed by the CFTC on July 9, 2013, charging RFF GP, KGW Capital, and White with fraudulently soliciting at least $5.8 million from at least 20 actual and prospective pool participants to participate in an off-exchange foreign currency commodity pool and misappropriating at least $1.7 million of pool participants’ funds.

According to the CFTC’s complaint, the defendants lured the public to invest by fraudulently telling prospective pool participants that their trading had been profitable, specifically touting compound annual growth rates as high as 37.08% and a total return on investment of 385.84% from 2009 to April 30, 2013.  Further, defendants allegedly told prospective pool participants that White had a 25-year successful career as a Wall Street broker.  The complaint alleges that, in fact, defendants had been losing money since beginning trading, which had not commenced until September 2011.  The complaint alleges further that the defendants failed to disclose the fact that they had been losing money, that they had been misappropriating pool participants’ funds, that White had been fired from his employment as a broker after a seven-year career in the securities industry, and that White had been both censured and barred by the New York Stock Exchange.

 

Page 1 of 2 >>
Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome