November 9, 2011
Velocity Agrees to Pay a Civil Monetary Penalty of $180,000
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against Velocity Futures, LLC, a registered futures commission merchant, for failing to supervise diligently the handling of its customer accounts.
The CFTC Order finds that from July 2003 until at least December 2007, Houston-based Velocity failed to develop and implement an adequate system to monitor the trading of customer accounts by third parties and protect customers against potential account churning. In addition, the Commission further finds that Velocity failed to conduct a diligent background check on Norbert Grupe, the principal of El Toro Consult SL, a foreign introducing broker (FIB) and commodity trading advisor, even though Velocity was aware of his potential criminal background.
The Order further finds that when Velocity signed the agreement with El Toro, the firm conducted a cursory background check on Grupe, which revealed no significant information. Subsequently, Velocity learned that an individual with the same name had been convicted of felony grand theft in Florida, but Velocity took no further steps to investigate or to determine if it had entered into an FIB agreement with the same individual. Instead, Velocity allowed Grupe to continue to introduce and to trade customer accounts through 2007. Grupe was, in fact, the convicted felon and a fugitive from the Florida Department of Corrections.
Finally, the Order finds that Velocity failed to develop and implement an adequate system to review trading and to detect potential churning in customer accounts controlled by third parties.
The CFTC Order imposes an $180,000 civil monetary penalty and cease and desist order on Velocity and requires that the firm undertake new supervisory procedures.
The CFTC Division of Enforcement staff members responsible for this case are Kyong J. Koh, A. Daniel Ullman II, Todd Kelly, Peter M. Haas, Paul G. Hayeck and Joan Manley.
Last Updated: November 9, 2011