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RELEASE: pr5632-09

  • Release: 5632-09
    For Release: March 11, 2009

    CFTC Charges Charlottesville, Virginia Man with Stealing $1 Million from Investors in a Ponzi Scheme Involving More than $10 Million

    Virginia Federal District Court Issues Restraining Order Freezing Defendants’ Assets and Preserving Records

    Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it charged John M. Donnelly of Charlottesville, Virginia, with operating a Ponzi scheme involving more than $10 million in connection with three commodity futures pools.

    The CFTC’s complaint, filed on March 11, 2009, charges Donnelly, along with three legal entities he created, Tower Analysis Inc., Nasco Tang Corp., and Nadia Capital Corp., with misappropriating at least $1 million and committing other types of fraud. In conjunction with the CFTC’s filing, the Honorable Glen E. Conrad of the U.S. District Court for the Western District of Virginia issued a restraining order freezing defendants’ assets and preserving records. Judge Conrad set a hearing on the CFTC’s motion for preliminary injunction on March 24, 2009.

    The CFTC complaint alleges that Donnelly solicited individuals to invest in U.S. Treasury Note futures and S&P 500 futures. It further asserts that Donnelly operated three commodity pools for over seven years; however, neither Donnelly, nor any employee or agent of the other proposed defendants, actively traded the pools’ funds. Indeed, despite representations that his trading strategy required daily trading of the accounts, Donnelly only executed seven trades over the course of seven years. Despite the absence of trading, the investors still lost their funds because Donnelly misappropriated at least $1 million for himself and his wife. Donnelly may have received another $1.7 million from pool funds to which he was not entitled.

    Three Relief Defendants Named

    According to the complaint, Donnelly concealed the fraud by paying off certain investors with other investor funds and by issuing false account statements to the investors, lulling them into the belief that their principal was earning steep profits. Donnelly is also being charged with failure to register as a commodity pool operator. The CFTC named as relief defendants the two commodity pools, Blue Logic Operating Partners LP and Nadia Capital Operating Partners LP, in order to preserve any assets that may still exist. Also named as a relief defendant is Donnelly’s wife, Deborah B. Donnelly.

    In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws and against further trading.

    The CFTC appreciates the assistance of the Securities and Exchange Commission and the U.S. Attorney’s Office for the Western District of Virginia.

    The following CFTC Division of Enforcement staff members are responsible for this case: Christine Ryall, Eugene Smith, Patricia Gomersall, and Joan Manley.

    Media Contacts
    Robert Holifield

    R. David Gary

    Dennis Holden

    Last Updated: March 11, 2009