March 1, 2011
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained more than $700,000 in restitution and civil monetary penalties in a federal court order against Jeffrey Shalhoub of Staten Island, N.Y., and his company, Jeff Shalhoub Investments (JSI) of Long Island City, N.Y., in connection with the fraudulent operation of a commodity futures Ponzi scheme (see CFTC Press Release 5826-10, May 19, 2010).
The consent order, entered by the Honorable Joanna Seybert of the U.S. District Court for the Eastern District of New York on February 23, 2011, requires Shalhoub to pay $241,900 in restitution and a $463,500 civil monetary penalty. The order also permanently bars Shalhoub from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.
Specifically, the order finds that, from at least July 2008 to January 2009, Shalhoub, as a commodity pool operator of a pool called The 9 Group, solicited $300,000 from 12 of his then-wife’s friends and family to trade futures. Shalhoub opened a trading account in his name and deposited approximately $146,000 of customer money into the account. Customer funds were transferred through JSI’s bank account and commingled with Shalhoub’s personal funds. Shalhoub misappropriated $154,500 of customer funds for personal use, including to pay for computer and golfing equipment, clothing, car payments on a Land Rover and a $3,500 tab at a Manhattan restaurant.
The consent order finds that Shalhoub falsely promised customers a monthly 10 percent to 36 percent return, while misrepresenting that the customer’s original investment could be returned at any time. To conceal and perpetuate his fraud, Shalhoub provided customers with false account statements misrepresenting that their accounts were increasing by as much as 5.2 percent per week when, in fact, the accounts were collectively losing money every month. Shalhoub paid purported profits to customers from their original principal or from money invested by new customers, in a manner similar to a Ponzi scheme.
CFTC Division of Enforcement staff members responsible for this case are Elizabeth Davis, Jessica Harris, Michael Loconte, Erica Bodin, Kenneth McCracken, Rick Glaser and Richard Wagner.
Last Updated: March 1, 2011