December 12, 2013
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action charging Carlsbad, California-based Direct Investment Products, Inc. (DIP) and its principal, Alexander Glytenko, with fraudulently soliciting approximately $3.9 million from approximately 761 individuals residing in Russia and various former republics of the former Soviet Union to trade futures, among other products, through a commodity pool known as DIP Capital Partners (the Pool) and misappropriating at least $464,000 of the pool participant funds.
The CFTC Complaint alleges that, from approximately 2005 until approximately 2010, the Defendants, either directly or through their agents, knowingly misrepresented the Pool’s performance history to both prospective and actual participants by a) presenting profitable performance figures for various of the Pool’s funds for years in which they knew the Pool did not exist, b) presenting hypothetical trading performance without labeling it as such, and c) presenting at least two years of profitable performance results for one of the Pool’s funds when, in fact, that fund had experienced losses during those years.
Specifically, the CFTC Complaint alleges, among other things, that, in the course of soliciting prospective participants for the Pool, the Defendants fraudulently claimed that the Pool made annual profits from 2003 through 2008 ranging from 12.60% to 47.20%, and that two of the Pool’s individual funds made annual profits from 2004 through 2008 ranging from 12.01% to 41.12% and 10.16% to 49.79%, respectively. The Complaint also alleges that the Defendants made similarly fraudulent profit claims in statements provided to actual participants, with some showing historical profits going back as far as 2002.
In fact, according to the Complaint, the Pool did not even exist until 2005, the profit figures claimed by the Defendants were not reflective of actual trading, but were based on the hypothetical performance of Defendant’s proprietary trading strategy, and certified financial statements of one of the Pool’s funds showed actual losses in 2007 and 2008.
The Complaint further alleges that in 2009, at a time when the Defendants had imposed a freeze on the withdrawal of participants’ funds as a result of substantial losses incurred by the Pool, Glytenko used participants’ funds to make a loan of $464,000 from DIP to himself. This loan has never been repaid, according to the Complaint.
DIP has been registered with the CFTC as a Commodity Trading Advisor (CTA) and as a Commodity Pool Operator (CPO) since April 2007. Glytenko has been registered as an Associated Person (AP) of DIP since April 2007.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws, as charged.
CFTC Division of Enforcement staff members responsible for this case are Alan I. Edelman, James H. Holl, III, Michelle Bougas, Dmitriy Vilenskiy, and Gretchen L. Lowe.
Last Updated: December 12, 2013