For Release: February 10, 2006
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the United States District Court for the Central District of California entered a consent order settling the CFTC’s charges in a sales solicitation fraud case the agency brought against Chase Commodities Corporation (Chase) and Lee LaGorio, both of Woodland Hills, California; Excel Obando of Sun Valley, California; and Universal Financial Holding Corporation (UFHC) of Aventura, Florida.
The consent order stems from a CFTC complaint filed on August 4, 2004 (see CFTC News Release 4973-04) charging that between August 2003 and August 2004, Chase’s sales force fraudulently solicited customers by exaggerating the profitability of trading options on futures. In the consent order, the court specifically found that Chase’s salespeople:
• represented that customers would make large profits -- such as doubling their money -- within short time periods by trading commodity options with Chase;
• based the profit representations on well-known public information that was already factored into the price of the commodity options, and on Chase’s alleged previous trading successes; and
• falsely represented to customers that the risk of loss from trading commodity options was minimal, while failing to disclose that between August 2003 and March 2004, most customers sustained losses.
The order also finds that approximately 99 percent of the firm's 359 actively trading customers lost money trading options on futures through Chase, for a total loss of more than $4 million, at a time when Chase was charging those customers more than $2 million in commissions and fees.
According to the consent order, Chase and UFHC, then a futures commission merchant, were parties to a guarantee agreement by which UFHC guaranteed “all obligations” of Chase stemming from the solicitation of, and transactions involving, customer accounts. According to the consent order, LaGorio and Obando were liable for the actions of Chase’s sales force, and UFHC was liable pursuant to its contractual agreement with Chase.
The court ordered defendants to pay $4.2 million in restitution to defrauded customers; assessed separate $120,000 civil monetary penalties against LaGorio and Obando; permanently enjoined Chase, LaGorio and Obando from engaging in sales solicitation fraud in violation of the Commodity Exchange Act and CFTC regulations; and banned Chase and LaGorio permanently, and Obando for five years, from trading on markets subject to Commission jurisdiction.
The CFTC would like to thank the National Futures Association for its assistance.
The following CFTC staff members are responsible for this case: Ken McCracken, Jo Mettenburg, Lacey Dingman, Sandy McCarthy, Thomas Bloom, and Richard Glaser.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious Internet websites.
In addition, the CFTC publishes a series of Consumer Advisories alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.
Last Updated: September 29, 2011