For Release: June 5, 2006
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that Judge Daniel T.K. Hurley of the U.S. District Court for the Southern District of Florida entered a consent order of permanent injunction against First American Investment Services, Inc., a Florida corporation; Steve Knowles and James Eulo of Deerfield Beach, Florida; Michael Savitsky III and Greg Allotta of Boca Raton, Florida; and Adam Mills of Pampano Beach, Florida, imposing more than $10 million in sanctions for violating the anti-fraud provisions of the Commodity Exchange Act (CEA).
The order was issued in a CFTC enforcement action filed in June 2004. (See CFTC News Release 4943-04, June 21, 2004.) According to the stipulated facts in the order, from at least December 2002 through August 2003, First American fraudulently solicited members of the public using high pressure sales pitches to open accounts at Universal Financial Holding Corporation to trade options on commodity futures. The order recites that First American fraudulently told prospective customers they could expect to make large returns quickly on their investments with little risk of loss.
Also as recited in the order, the First American sales staff commonly represented that customers could reap substantial profits by trading oil or unleaded gas options based upon various well known world events, such as the crisis in the Middle East, that they claimed would virtually guarantee a profit in a short period of time. The order recites that those statements were false and misleading because efficient markets quickly factor publicly known information into the price of contracts and there is substantial risk trading options. As a result, the order continues, rather than reap profits, over 97 percent of First American’s 700 customers lost money, suffering total losses of more than $11 million – over half of which went to First American in commissions.
The order includes stipulations that Savitsky, Mills, Allotta and Eulo were among the First American salesmen making the fraudulent misrepresentations and omissions. The order also stipulates that Knowles, the company’s president, is liable because he controlled the operations of First American and knowingly induced the violations or failed to act in good faith concerning the fraudulent acts.
The order permanently enjoins all the defendants from committing further specified violations of the CEA. The order also requires defendants to repay customers nearly $8 million, making the defendants jointly and severally liable in the following amounts: First American $7,983,388; Knowles $1,600,000; Allotta $1,137,000; Savitsky $660,000; Mills $250,000 and Eulo $200,000. In addition, the order requires the defendants to pay civil monetary penalties totaling more than $2 million: First American $1,000,000; Knowles $400,000; Allotta $373,000; Savitsky $140,000; Mills $75,000 and Eulo $75,000.
The following CFTC Division of Enforcement staff members were responsible for this case: Mark Bretscher, Susan Padove, William Heitner, Robert Greenwald, Rosemary Hollinger, and Joan Manley.
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For Customer Protection information warning consumers to be alert to possible fraudulent claims that they can profit on commodity futures or options trading as a result of changes in the prices of physical commodities based on seasonal weather patterns or other well-known events, please see the CFTC’s Consumer Advisory of December 20, 2005.
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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