December 20, 2016
Washington, DC -- The U.S. Commodity Futures Trading Commission (CFTC) filed a civil anti-fraud enforcement action in the U.S. District Court for the District of Arizona, charging Defendants Derek Springfield and his company, Draven, LLC (Draven), both of Mesa, Arizona, with engaging in fraudulent sales practices, providing false account statements to commodity pool participants, and misappropriating pool participants’ funds.
In its Complaint (see Related Link), the CFTC alleges that, from at least July 2014 through the present (the Relevant Period), Springfield and Draven fraudulently solicited and received at least $1.46 million from at least 86 individuals in connection with pooled investments in commodity futures and foreign currency exchange (forex transactions). At no time during the Relevant Period was Draven registered with CFTC as a Commodity Pool Operator (CPO), nor was Springfield registered as either an Associated Person of a CPO or as a CPO, as required.
According to the Complaint, the Defendants solicited potential pool participants to invest with Draven by telling them that their funds would be placed in segregated accounts and traded on their behalf by “institutional quality traders with extensive experience generating returns on the Futures, Forex and Options markets.” In reality, however, the Complaint charges that the Defendants misappropriated some of pool participants’ funds to pay for Draven’s corporate expenses and Springfield’s personal expenses and never traded pool participants’ funds in the manner they advertised. Rather, according to the Complaint, the Defendants pooled together the funds received from pool participants into two separate commodity pools and traded only a small percentage of the funds deposited in the pools.
As further alleged, what trading was done on behalf of pool participants was executed by Springfield through one or more trading accounts maintained in his name at various registered Futures Commission Merchants and Retail Foreign Exchange Dealers. However, Springfield allegedly was not a successful trader and incurred substantial losses in the trading accounts that he traded on behalf of pool participants. To cover up these losses and the misappropriation of pool participants’ funds, the Defendants allegedly fabricated and issued false statements to pool participants, which purported to show profitable trading results on their behalf. And to further perpetuate their fraud, the Defendants operated a Ponzi-style scheme that used pool participants’ funds to pay returns to other pool participants who requested withdrawals from their accounts, according to the Complaint.
In its continuing litigation against the Defendants, the CFTC seeks restitution to defrauded clients, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws and regulations, as charged.
CFTC Division Enforcement staff members responsible for this case are Michelle Bougas, Alan Edelman, James H. Holl, III, and Rick Glaser.
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CFTC’s Commodity Pool Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.
Last Updated: December 23, 2016