For Release: July 25, 2006
Washington, D.C.— The United States Commodity Futures Trading Commission (CFTC) announced today that on July 11, 2006 the Honorable Carlos Murguia,United States District Judge for the District of Kansas, entered an order of default judgment for permanent injunction prohibiting defendant Nicholas A. Guarino, Jr., of Kansas City, and his Merriam, Kansas based company Wall Street Underground, Inc. (WSU), from further fraudulent conduct and from engaging in any business activities related to commodity futures and options trading.
The court ordered Guarino and WSU to pay $2.4 million in restitution to victims of the fraud and to pay a civil monetary penalty of $7.1 million as a result of violations of federal commodities laws.
The court’s order stems from the CFTC’s April 22, 2003, complaint in CFTC v. Wall Street Underground, Inc., et al., Civil Action No. 032193-CM (D. Kan.), which charged Guarino, WSU, and several others as participants in a fraudulent scheme to sell commodity futures and options trading systems (see CFTC Press Release 4778-03, April 25, 2003.) The court entered this default judgment against Guarino and WSU after Guarino failed to respond to the CFTC’s allegations and defend the case.
The order finds that Guarino and WSU defrauded and deceived customers through promotional materials used to market trading systems. Specifically, the materials overstated the profit potential of the trading systems; failed to adequately warn of the risks inherent in trading commodity futures and commodity options; made false money-back guarantees; and did not explain to customers the volatility of the markets and the potential for substantial losses. Further, Guarino and WSU intentionally failed to disclose in the WSU promotional materials that Guarino was a convicted felon. Neither did they disclose that the National Futures Association (NFA) had previously expelled Guarino’s firm, H.G.S.E. Commodities, Inc., from membership in the NFA.
The order requires Guarino and WSU to pay a total of $2,374,582.00 to the defrauded customers and a civil monetary penalty of $7,123,746.00 equal to three times the amount owed to customers. The order also directs Guarino to pay the restitution to Robert Evans and Associates LLC, the court-appointed Receiver for distribution to customers. At the time the order was entered, the court-appointed Receiver collected at least $1.2 million from an account belonging to WSU.
In earlier settlements, California resident Derek Abrahams was ordered to pay $50,000 in civil penalties for his participation in the scheme (see CFTC Press Release 5071-05, April 26, 2005), and Frank Asaro and Web Fulfillment Centre, Inc., of Kansas City, were ordered to pay $310,000 in civil penalties for their participation in the scheme.
The following CFTC Division of Enforcement staff members are responsible for this case: Ava M. Gould, Donald Nash, Venice Bickham, Scott Williamson, Rosemary Hollinger, and Joan Manley.
Last Updated: April 22, 2010