The Blotter: CFTC cracks down on commodity pools

Regulatory actions taken this week:

Oregon

CFTC seeks to revoke the registrations of Joshua Wallace and System Capital 

The CFTC filed a notice of intent (Notice) to revoke the registrations of Joshua Wallace and System Capital, LLC (System Capital).  System Capital, based in Oregon, is a registered commodity trading advisor.  Wallace is an Oregon resident registered as an associated person of System Capital and is System Capital’s founder, sole owner, principal, and president.

The CFTC Notice alleges that Wallace and System Capital are subject to statutory disqualification from CFTC registration based on an order for entry of default judgment, permanent injunction and ancillary equitable relief entered by the U.S. District Court for the Southern District of New York on March 14, 2013.  The order prohibits Wallace and System Capital from committing further fraud, among other violations as charged, and includes findings that Wallace and System Capital misrepresented to prospective and actual clients that Wallace and System Capital had a successful history of trading futures contracts and that System Capital had assets under management of at least $29 million; and that as a result of these fraudulent solicitations, they successfully solicited at least 17 clients and managed approximately $3.5 million of client funds.  The order also found that Wallace, on behalf of System Capital and himself, knowingly provided false information and documents to the NFA.  Among other sanctions, the order permanently enjoined Wallace and System Capital from further violations of the anti-fraud provisions of the CEA, as charged, and ordered each of them to pay a $420,000 civil monetary penalty.

In addition, the Notice alleges that Wallace and System Capital are subject to disqualification from CFTC registration based on Wallace’s conviction for criminal commodities fraud in connection with these same activities, as entered by the U.S. District Court for the Southern District of New York on Nov. 27, 2012.  On May 15, 2013, the District Court sentenced Wallace to 27 months in prison.

 

New York

Federal Court orders Laurence Dodge, principal of Madison Dean, Inc., to pay nearly $400,000 to settle forex fraud charges

The CFTC obtained a federal court consent order of permanent injunction against Laurence Dodge of Fresh Meadows, N.Y. a principal of Madison Dean, Inc. of Wantagh, N.Y., requiring Dodge jointly to pay nearly $250,000 in restitution to customers and a $150,000 civil monetary penalty.  The order also imposes permanent trading and registration bans against Dodge and prohibits him from violating the anti-fraud provisions of the CEA. 

The order, entered on June 20, 2013, by Judge Joseph F. Bianco of the U.S. District Court for the Eastern District of New York, stems from a CFTC complaint filed on May 8, 2012, charging Dodge, Madison Dean, and another Madison Dean principal, George Athanasatos, also of Wantagh, with fraudulently soliciting approximately 19 persons to invest approximately $415,000 in managed trading accounts to trade off-exchange foreign currency contracts on a leverage or margined basis.

 The order finds that Dodge misrepresented and omitted material facts about the history of Madison Dean, the nature of Madison Dean’s clients, the background and qualifications of Madison Dean’s employees, and the performance record of Madison Dean for the purpose of creating a false impression that Madison Dean was a well-established and successful company.  The order further finds that after being in operation for a little over one year – during which time customers lost approximately $250,000 and Madison Dean collected approximately $112,000 in commissions and fees – Madison Dean shut down its operation with no notice to its customers and no way for those customers to contact the company or anyone associated with it.

Previously, on March 8, 2012, the court entered a consent order of permanent injunction against Madison Dean and Athanasatos, which required them jointly to pay nearly $250,000 in restitution to defrauded customers and imposed a $1 million civil monetary penalty on Madison Dean and a penalty of $210,000 on Athanasatos.  The order also imposes permanent trading and registration bans against them and prohibits them from violating the anti-fraud provisions of the CEA as charged.

Comments
comments powered by Disqus