December 6, 2012
CFTC Charges Ray Thomas Brown with Fraud, Misappropriation, and Registration Violations in Operating Two Commodity Pool Scams
Court enters order freezing Brown’s assets and protecting books and records
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on November 26, 2012, it filed a civil enforcement complaint under seal in the U.S. District Court for the District of Arizona, charging defendant Ray Thomas Brown of Phoenix, Ariz., with fraud in operating two commodity scams since at least 2010.
According to the complaint, unsealed on December 3, 2012, Brown fraudulently solicited members of the public to participate in a commodity pool while acting as an unregistered commodity pool operator, and Brown fraudulently duped persons to authorize him to trade their commodity futures accounts. Brown’s fraud allegedly included misrepresentations and omissions about his past trading success, trading profits, trading expertise, and personal history, the dissemination of false account statements, and the misappropriation of customer funds. As a result of at least two fraudulent schemes, Brown succeeded in duping customers into sending at least $1.2 million to bank and trading accounts under his control, according to the complaint.
On November 27, 2012, the court entered an order freezing Brown’s assets and requiring him to give the CFTC access to his books and records.
In the first scheme, according to the CFTC complaint, Brown lured his victims into a Ponzi scheme by fraudulently guaranteeing profitable returns of up to 100 percent per month and falsely representing that trading in the pool account was generating as much as multi-million dollar profits. Brown allegedly directed persons to send funds to bank accounts under his control to participate in the commodity pool, and at least $950,000 was deposited in these accounts. Unknown to the victims, Brown allegedly misappropriated a considerable portion of investors’ funds and allegedly used the funds he collected from pool participants to pay for his personal expenses. Brown actually traded only a small portion of the funds he received, and he lost virtually all of those funds in trading, according to the complaint. Furthermore, Brown allegedly concealed his trading losses by issuing false account statements showing fictitious trading profits and grossly inflated cash assets of the pool.
In the second scheme, Brown fraudulently misrepresented his trading expertise and past performance to convince clients to open individual commodity futures trading accounts and to authorize him to trade those accounts, according to the complaint. These victims deposited at least $270,000 into those accounts, and Brown lost virtually all of those funds within 90 days, according to the complaint.
In its continuing litigation in this matter, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of federal commodities laws, as charged.
The CFTC thanks the Black Mountain Precinct of the Phoenix Police Department for its invaluable assistance in this matter. The CFTC also appreciates the assistance of the Arizona Corporation Commission.
CFTC Division of Enforcement staff members responsible for this case are Jonathan Robell, Dmitriy Vilenskiy, Tracy Walraven, Richard Foelber, and Joan Manley.
Last Updated: December 6, 2012