For Release: July 19, 2006
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Donald M. Middlebrooks of the U.S. District Court for the Southern District of Florida issued a final judgment against Wilshire Investment Management Corporation, Inc. (WIMC), a Florida corporation; its president and CEO, Andrew Alan Wilshire of Jupiter, Florida, and employees Eric Scott Malcolmson and James Joseph Russo of Tequesta and Palm Beach Garden, Florida, respectively; and National Commodities Corporation, Inc. (NCC) of Fort Lauderdale, Florida. The court denied defendants’ Motion to Amend the final judgment on June 1, 2006.
The final judgment trial order, entered on December 5, 2005, followed a four-day bench trial stemming from a complaint filed by the CFTC on September 14, 2004. The complaint alleged that the defendants fraudulently solicited customers by misrepresenting the likelihood of realizing large profits from commodity options trading and misrepresenting the risk involved in trading commodity options (see CFTC News Release 4997-04).
The final judgment order found Malcolmson and Russo committed solicitation fraud in violation of the Commodity Exchange Act and Commission regulations and held WIMC vicariously responsible for its employees’ conduct. The order also held WIMC president, Andrew Alan Wilshire, liable on two theories—as a controlling person and for failing to diligently supervise WIMC employees. The order found that Wilshire knew of his employees’ fraudulent sales practices or that Wilshire was “willfully blind” to these practices. The order also held defendant National Commodities Corporation, WIMC’s guarantor, jointly and severally liable for WIMC’s violations.
Specifically, the court found that since at, least from September 2000, WIMC, Wilshire, Malcolmson, and Russo fraudulently solicited customers by misrepresenting the likelihood of large trading profits and downplaying the risks involved in trading commodity options, and by linking profit expectations to well-known weather events, seasonal trends, and historical prices. For example, according to the order, Malcolmson claimed to help his clients “double or triple” their money, turning $5,000 and $10,000 accounts into $100,000 -- even though 88 percent of his clients lost money between 2000 and 2004, with the largest gain realized by any of his clients of approximately $8,000. In ruling against the defendants, the court rejected WIMC’s argument that their written risk disclosure statements signed by the customers balanced exuberant descriptions of profit potential.
The court ordered the defendants to pay a total of $147,891.99 in restitution to eight defrauded customers and imposed a $100,000 civil penalty against each of the three individual defendants and a $100,000 civil penalty against WIMC—for which the National Commodities Corporation guarantor is jointly and severally liable. This type of liability means NCC may have to satisfy the entire judgment amount if the other defendants cannot pay.
Based on the court’s finding that defendants’ behavior was blatant, brazen, and repeated, the order also permanently prohibits Wilshire, Malcolmson, and Russo from engaging in any commodity-related activity in the future.
The following CFTC Division of Enforcement staff members are responsible for this case: Allison Lurton, Rachel Entman, Jason Gizzarelli, and Lacey Dingman.
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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: October 4, 2011