Blog Posts Tagged With CFTC

SEC and CFTC Enforcement Slow During Government Shutdown (Jan. 26, 2019)

The federal government was shut down from December 22, 2018, through January 25, 2019.  SEC and CFTC enforcement activity fell off sharply during that period.  In January of 2019, the SEC announced four enforcement actions, compared to 10 in January of last year.  On the administrative side, the SEC announced two enforcement actions this month, compared to 23 in January of last year.  The CFTC issued one enforcement-related press release in January, compared to 13
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In re Newport Private Capital LLC and Jonathan Hansen (A.P. Dec. 21, 2018, Settled)

Action against Respondents, a commodity trading firm and its principal, for an alleged cherry-picking scheme.  According to the CFTC, Respondents executed intraday commodities trades in order to allocate profitable trades to themselves and non-profitable trades to customers and also kept inadequate records.  Respondents have agreed to pay, jointly and severally, a civil penalty of $315,000 and post-judgment interest and to permanent commodity interest trading and CFTC registration bans.

CFTC Press Release 

CFTC Order
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CFTC v. Michael S. Wright and Wright Time Capital Group LLC (d/b/a Global FX Club) (S.D.N.Y. Dec. 7, 2018, Default Judgment Order)

Action against Defendants, a commodity pool and its CEO, for alleged fraud.  According to the CFTC, Defendants fraudulently solicited investments, made false representations to investors, misappropriated funds, falsified account statements, and commingled pool funds, among other violations.  The court has entered a default judgment against Defendant company that orders restitution of $371,250, a civil penalty of $1,113,750, post-judgment interest, and permanent trading and registration bans.  A consent order was previously entered as to Defendant CEO,
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CFTC v. Haena Park, et al. (S.D.N.Y. Dec. 3, 2018, Settled)

Action against Defendants, two individuals and their companies, for alleged fraud on investors related to trading in foreign currencies and futures contracts.  According to the CFTC, Defendants misrepresented their trading expertise and track record, provided investors with false documents, and made false statements to the National Futures Association, among other violations.  Defendants have agreed to pay restitution totaling $22,917,551, civil penalties totaling $175,000, and post-judgment interest.  One individual Defendant has agreed to a five-year trading
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CFTC v. Dro Kholamian and Blue Star Trading LLC (N.D. Ill. Nov. 30, 2018, Contested)

Action against Defendants, a commodity trading advisor and its principal, for alleged fraud on investors and failure to register with the CFTC.  According to the CFTC, Defendants misrepresented the prospect of high returns in order to solicit investor funds for trading in off-exchange foreign currency and commodity future contracts, which Defendants then misappropriated.  Defendants have agreed to a consent order for a preliminary injunction, but the case remains contested.

CFTC Press Release 

CFTC Complaint
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CFTC v. Lon Olen Friedrichsen (S.D.N.Y. Nov. 26, 2018, Contested)

Action against Defendant, an unregistered commodity trading advisor, for alleged fraud related to futures contracts.  According to the CFTC, Defendant misrepresented his experience and success in order to induce investors to grant him access to their futures trading accounts.  The CFTC alleges that Defendant’s trading resulted in large losses to these accounts.  The court has entered a default judgment requiring Defendant to pay $591,570 in restitution, a civil penalty of $1,500,000, and post-judgment interest and
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CFTC Releases Annual Enforcement Results for Fiscal Year 2018 (Nov. 15, 2018)

The CFTC’s Division of Enforcement released its annual report reviewing enforcement actions from the 2018 fiscal year. According to the report, the Commission brought 83 enforcement actions and obtained more than $950 million in monetary sanctions.  The report noted key initiatives that began or continued during fiscal year 2018, including cooperation and self-reporting, data analytics, and the development of specialized task forces focused on four different substantive areas:  (1) spoofing and manipulative trading, (2) virtual
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CFTC v. Algointeractive Inc., et al. (S.D.N.Y. Nov. 13, 2018, Consent Order)

Action against Defendants, a hedge fund and its two principals, for alleged fraudulent solicitations and misappropriation of investor funds. According to the CFTC, Defendants misrepresented to investors their level of experience and plans to invest funds in futures contracts. The CFTC alleges that Defendants instead used investor funds for their personal benefit and concealed losses in communications to investors. The CFTC also alleges that Defendants failed to register their commodity pool. One Defendant principal has
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SEC v. Gaylen D. Rust and Rust Rare Coin, Inc. (D. Utah Nov. 15, 2018, Contested) and CFTC and Utah Division of Securities v. Rust Rare Coin Inc. and Gaylen Dean Rust (D. Utah Nov. 13, 2018, Contested)

Actions against Defendants, a trader and a rare coin company, for an alleged fraudulent investment scheme. According to the SEC and CFTC, Defendants misled investors by making false statements about a silver trading program. The SEC and CFTC allege that Defendants used investor funds to make Ponzi-like payments to earlier investors and to pay for Defendant trader’s personal and business expenses.

SEC Litigation Release

SEC Complaint 

CFTC Press Release 

CFTC Complaint
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CFTC v. Richard D. Carter, et al. (N.D. Ill. Nov. 13, 2018, Partially Settled, Partially Contested)

Action against Defendants, a corporation and its two principals, for alleged fraudulent solicitation and misappropriation of investor funds related to the operation of a commodity pool fraud.  According to the CFTC, Defendants failed to register with the CFTC and made material misrepresentations to pool participants about the pool’s success and prospective profits.  One Defendant principal has agreed to a five-year industry bar and to pay $280,000 in restitution, $45,342.44 in disgorgement, a civil penalty of
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In re Commerzbank AG (A.P. Nov. 8, 2018, Settled)

Action against Respondent, a banking and financial services company, for alleged violations of the Commodity Exchange Act and CFTC regulations. According to the CFTC, Respondent failed to supervise the activities of its swap dealers and made material misstatements and omissions to the CFTC about operations and regulatory compliance for these dealers. Respondent has agreed to pay a $12 million civil penalty and has also agreed to remediation and monitoring measures.

CFTC Press Release

CFTC Order
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In re Joseph Kim (A.P. Oct. 29, 2018, Settled)

Action against Respondent, a former virtual currency trader, for an alleged investment scheme and misappropriation of his employer’s virtual currencies. According to the CFTC, Respondent misappropriated Bitcoin and Litecoin from the trading firm where he worked. The CFTC further alleges that Respondent falsely solicited investors for funds that he then lost by executing high-risk virtual currency trades. Respondent has agreed to pay restitution of $1,146,000 and post-judgment interest and to permanent trading and registration bars.
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CFTC v. Scott Allensworth, et al. (C.D. Cal. Oct. 26, 2018, Default Judgment Order)

Action against Defendants—an investment, tax, options, and retirement adviser, his company, and two traders—for alleged fraud.  According to the CFTC, Defendants solicited investments in commodity pools based on false promises of high returns and misappropriated client funds.  The court has entered an order of default judgment that imposes permanent trading and registration bars on all Defendants.  Defendant adviser, Defendant company, and one Defendant trader are required to pay, jointly and severally, $268,000 in restitution, a
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CFTC v. Thomas C. Lindstrom (N.D. Ill. Oct. 4, 2018, Consent Order)

Action against Defendant, a Treasury note trader, for alleged fraud in connection with trading in 10-year U.S. Treasury note futures options. According to the CFTC, Defendant inflated the value of his purchased options in order to receive larger profit shares from his employer. Defendant has agreed to pay $13,981,478 in restitution and $855,000 in civil penalties. Defendant has plead guilty in a parallel criminal proceeding.

CFTC Press Release

CFTC Order
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CFTC v. Kevin Scott Antonovich (E.D.N.Y. Oct. 3, 2018, Consent Order)

Action against Defendant trader for alleged misappropriation of investor funds, fraudulent solicitation, and registration violations. According to the CFTC, Defendant misappropriated funds that he fraudulently solicited from participants in a commodity pool of off-exchange binary options. The CFTC alleges that Defendant made false and misleading representations to participants regarding the use of funds and falsified documents related to available funds. Defendant has agreed to pay $554,375 in restitution and civil penalties.

CFTC Press Release

CFTC
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CFTC v. Aaron Michael Scott (W.D. Wash. Oct. 3, 2018, Contested)

Action against Defendant, an owner, president, and secretary of a defunct precious metal dealer, for a fraudulent scheme in connection with sales of precious metals. The CFTC alleges that customers paid Defendant in exchange for precious metals, but Defendant misappropriated these funds. The CFTC also alleges that Defendant made various misrepresentations to customers about inventory and use of funds.

CFTC Press Release
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CFTC v. Gelfman Blueprint, Inc. and Nicholas Gelfman (S.D.N.Y. Oct. 1, 2018, Consent Order)

Action against Defendants, a Bitcoin hedge fund and its CEO, for alleged operation of a Bitcoin Ponzi scheme.  According to the CFTC, Defendants promised to use investor funds in a high-frequency algorithmic trading strategy but instead used the funds to make payouts to other investors.  The CFTC also alleges that Defendants falsified performance reports and staged a computer hack to conceal trading losses and misappropriation of investor funds.  Defendant company has agreed to pay restitution
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In re Jacob Bourne (A.P. Sep. 28, 2018, Settled)

Action against Respondent, a former managing director of the inflation desk at a financial services company, for alleged mismarking of swap valuations. According to the CFTC, Respondent concealed trading losses by entering false swap valuations into an internal spreadsheet and later tried to conceal this misconduct by falsifying versions of the spreadsheet. Respondent has agreed to pay a $350,000 civil penalty, post-judgment interest, and to permanent trading and registration bars. The CFTC has closed a
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CFTC v. Lucrative Pips Corporation and Kevin Perry (N.D. Ga. Sept. 28, 2018, Contested)

Action against Defendants, a company and its founder and CEO, for alleged commodity fraud and misappropriation related to a scheme in certain off-exchange forex contracts.  According to the CFTC, Defendants falsely represented their trading strategy and returns while soliciting customers and lost or misappropriated the funds obtained from investors.

CFTC Press Release
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CFTC v. John Doe 1 a/k/a Morgan Hunt dba Diamonds Trading Investment House and John Doe 2 aka Kim Hecroft dba First Options Trading (N.D. Tex. Sept. 28, 2018, Contested)

Action against Defendants for alleged fraudulent scheme to solicit Bitcoin.  According to the CFTC, Defendants misappropriated customer funds after making false or misleading representations or omissions about their planned investment of funds in forex contracts, binary options, and diamonds. The CFTC further alleges that Defendants forged account statements and documents and impersonated a CFTC investigator.

CFTC Press Release
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CFTC v. TFS-ICAP, LLC, et al. (S.D.N.Y. Sept. 28, 2018, Contested)

Action against Defendants, an interdealer broker joint venture, its Global Head of Emerging Markets FX Options, and its CEO, in connection with alleged deception of clients through the use of fake bids, offers, and trades in the forex options market.  The CFTC alleges that senior managers encouraged or knowingly allowed the misconduct to continue and that Defendant CEO knew or had reason to know of the practices but failed to take steps to prevent them.
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In re Michael Leibowitz (A.P. Sept. 28, 2018, Settled)

Action against Respondent, Chairman of the Board of an interdealer foreign exchange options broker, for alleged failure to diligently supervise forex options trades by the emerging options desk.   According to the CFTC, brokers engaged in fake bids, offers, and trades to misrepresent the level of liquidity and encourage customers to trade.  The CFTC further alleges that senior managers had reason to know that this practice was ongoing and that Respondent failed to implement any policies
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