For Release: November 7, 2007
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) and the New Hampshire Department of State, Bureau of Securities Regulation (New Hampshire) announced today that the Honorable Daniel Hurley of the U.S. District Court of the Southern District of Florida entered an order against Deerfield Beach-area resident Philip Tuccelli and his company Cromwell Financial Services, Inc. (Cromwell), settling charges that they fraudulently solicited customers to purchase options on commodity futures contracts.
The order also settles charges that Cromwell’s branch managers, Richard Astern, Dennis Gee and Richard Peluchette and Compliance Director Michael Staryk III, failed to diligently supervise Cromwell’s employees.
The Consent Order of Permanent Injunction and Other Equitable Relief was entered on October 27, 2007, and stems from a complaint filed by the CFTC and New Hampshire on June 12, 2005 (see CFTC Press Release 5083-05, June 16, 2005). New Hampshire joined in the complaint to protect the interests of New Hampshire residents solicited by Cromwell.
Defendants Fraudulently Solicited More than 900 Customers, Who Lost Substantially All of Their Funds
The order finds that, from at least January 1, 2002 through December 2003, using false and misleading sales presentations, Cromwell employees fraudulently solicited at least 900 members of the public to trade options on commodity futures contracts in accounts held at two futures commission merchants.
Specifically, the order finds that Cromwell’s employees made false and materially misleading statements and omissions to actual and prospective customers by: 1) exaggerating the magnitude and likelihood of potential profits; 2) representing that their trade recommendations could result in large profits within short periods of time; 3) downplaying the risks of loss from trading options on commodity futures contracts; and (4) in light of the profit representations they were making, failing to advise customers that over 85 percent of Cromwell’s customers lost money trading.
The order finds Cromwell liable for the fraud, which was committed by Cromwell’s employees acting within the scope of their employment. The order also finds Tuccelli, Gee, Peluchette, Staryk, and Astern liable for their failure to diligently supervise Cromwell’s employees. The order further finds Tuccelli liable as a controlling person of Cromwell for the fraud and failure to supervise violations.
The order holds the defendants liable to pay Cromwell’s customers restitution in the following amounts: Cromwell and Tuccelli, jointly and severally, $9.2 million with Tuccelli’s obligation capped at $2 million; Gee, $523,000; Astern, $285,000; Staryk, $130,000; and Peluchette, $241,000.
The order also imposes civil monetary penalties against the defendants in the following amounts: Cromwell, $9.2 million; Tuccelli, $250,000; Gee, $120,000; Astern, $120,000; Staryk, $50,000; and Peluchette, $120,000. Finally, the order permanently prohibits the defendants from engaging, directly or indirectly, in any business activities related to commodity interest trading.
The following CFTC Division of Enforcement staff members are responsible for this case: Timothy J. Mulreany, Luke Marsh, Michael Amakor, Paul Hayeck, and Joan Manley.
The responsible New Hampshire staff member is Jeffrey Spill. The CFTC and New Hampshire thank the Florida Department of Financial Services, the Broward County Sheriff’s Office, the Boca Raton Sheriff’s Office, the Fort Lauderdale Police Department and the National Futures Association for the substantial assistance they provided in this matter.
Last Updated: November 7, 2007