You may also be interested in...
Case Status Report: Equity Financial, Shasta or Tech Traders
Information Related to the CFTC’s Case Against the Defendants
On April 14 and 15, 2005, Defendants Shimer and Firth filed a motion to dismiss and motion for summary judgment against the Commission. Shimer and Firth later withdrew their motion for summary judgment. Equity Financial joined the motion to dismiss. Defendants argued in their summary judgment motion and their motion to dismiss that Shasta was not a commodity pool. On October 4, 2005, Judge Kugler entered an Order denying the Defendants’ motions to dismiss and for summary judgment and entered an accompanying opinion which noted that “Shasta is precisely the form of entity Congress authorized the CFTC to regulate as a commodity pool.”
On April 7, 2006, the Commission filed a Motion for Partial Summary Judgment as to Equity Financial Group, Robert Shimer and Vincent Firth. The same day, defendants Shimer and Firth filed renewed motions for summary judgment.
On November 16, 2006, Judge Kugler denied Shimer and Firth’s renewed motions for summary judgment. On December 18, 2006, Judge Kugler granted in part and denied in part the CFTC’s motion for partial summary judgment against Equity Financial, Shimer and Firth. The Court found Equity, Shimer and Firth liable for commodity pool operator (CPO) fraud under section 4o(1)(B) of the Commodity Exchange Act (CEA). The Judge found that Firth violated 4o(1)(B) because a) Firth had a fiduciary relationship to Shasta investors, b) he distributed a private placement memorandum (PPM) that stated he had done due diligence on Tech Trader’s results when he did nothing but rely on Shimer c) the PPM he distributed also stated that results would be independently verified by a CPA by a process he admitted he didn’t understand, d) he knew that Shimer was preparing Shasta’s own account statements that were supposed to be coming from Tech Traders, and e) these actions had the effect of defrauding or deceiving Shasta investors. Judge Kugler also found that Shimer had a fiduciary relationship to Shasta’s investors, intentionally ignored numerous and varied warning signs regarding Tech Traders and Murray and that this lack of action affected a fraud on Shasta’s investors.
The Court also found that Equity violated 4m of the CEA, which requires that CPOs register with the CFTC, that Firth and Shimer violated 4k of the Act by soliciting investors when they were not registered and that Equity is liable for Shimer’s and Firths’ violations of the Act because they were Equity’s agents.
On December 12, 2006, Shimer and Firth filed motions to disqualify Judge Kugler from the case because he twice denied their motions for summary judgment. On January 3, 2007, Shimer and Firth filed a petition for a writ of mandamus to the Third Circuit Court of Appeals seeking to disqualify Judge Kugler from the case. Judge Kugler denied their motion to him on January 5, 2007. On February 1, 2007, the Third Circuit denied their petition for a writ of mandamus as well.
On February 9, 2007, Shimer and Firth filed a joint notice of appeal, which attempts to appeal from the district court’s denial of their motions for summary judgment and the district court’s grant of partial summary judgment to the CFTC.
On April 18, 2006, Defendant Coyt E. Murray was charged criminally in a Bill of Information by the United States Attorney for the Western District of North Carolina with commodities fraud, mail fraud and wire fraud arising from his actions for which he was charged civilly in this action. He pled guilty to these charges the same day. He is awaiting sentencing.
On July 7, 2006, Judge Kugler entered a Consent Order of Permanent Injunction and other Ancillary Relief against defendant J. Vernon Abernethy. The Consent Order found, among other things, that Abernethy committed CPO fraud under 4o(1) of the Act and violated 4k of the Act by failing to register before soliciting investors to invest in a commodity pool. Abernethy is permanently enjoined from, among other things, violating 4o or 4k of the Act, engaging in or controlling, directing or accepting funds for trading commodity futures trading, trading his funds or the funds of others in commodity futures contracts or otherwise engaging in any business activities related to commodity futures and options trading that requires registration. He also agreed not to practice as an accountant before the Commission for a period of 10 years, not to accept any engagement that involves the review or analysis of commodity pool statements and not to accept any engagement that involves the analysis of futures or options statements. He is also liable, along with any other Defendants found to be liable to pool participants later by settlement or judgment, for $5 million in restitution to Tech Traders’ investors and required to pay a civil monetary penalty to the federal government of $300,000.
On February 9, 2007, Magistrate Donio entered a Scheduling Order. Under the Order, the Commission must prepare and send a proposed pre-trial order to the defendants which lists the issues to be tried, the witnesses to be called and the exhibits which the Commission intends to introduce at trial. The Defendants must prepare their portion of this pre-trial order by May 14, 2007. The case is set for a pre-trial conference in Camden, New Jersey on May 24, 2007. After the pre-trial conference, the case will be set for trial as soon thereafter as the Court’s docket will allow.
Related Documents:
- Information Related to the Claims Process
- Information Related to the CFTC’s Case Against the Defendants
- Daily Updates and Court Documents: 2006
- Daily Updates and Court Documents: 2005
- Daily Updates and Court Documents: 2004
- News Release: 4908-04, April 6, 2004
- Complaint, April 1, 2004
- Initial Questionnaire (Word)
- Initial Questionnaire (PDF)
Media Contact:
Rosemary Hollinger
Associate Director and Regional Counsel
CFTC Division of Enforcement
525 West Monroe Street
Suite 1100
Chicago, IL 60661
(No investor inquiries, please.)
Investor Inquiries:
Joy McCormack, Investigator
CFTC Division of Enforcement
525 West Monroe Street
Suite 1100
Chicago, IL 60661
shasta@cftc.gov
Receiver Contact and Claims Inquiries:
Stephen Bobo
Sachnoff & Weaver, Ltd.
30 South Wacker Drive
29th Floor
Chicago, IL 60606-7484