UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

_______________________________________________________
)
COMMODITY FUTURES TRADING COMMISSION, ) CASE NO. 6:00-0567
Plaintiff, )
)

v.

)
)
ROBERT L. DORMAGEN ) COMPLAINT FOR INJUNCTIVE

345 Southgate Drive

) AND OTHER EQUITABLE RELIEF
Crossville, Tennessee 38555, ) AND CIVIL MONETARY PENALTIES
) UNDER THE COMMODITIES
and ) EXCHANGE ACT
)
DELTA FINANCIAL CORPORATION, )
a West Virginia corporation )
200 Walnut Street, Suite 101 )
Ravenswood, West Virginia 26164, )
)

Defendants.

)
_______________________________________________________ )

I.

SUMMARY

1. From July 1996 through July 1999, Robert L. Dormagen ("Dormagen") was the commodity pool operator of a commodity pool called Capitol Group III, L.P. ("CGIII"), which had eleven pool participants who contributed approximately $175,300 to trade commodity futures and options. Dormagen defrauded the CGIII investors by misappropriating and converting the pool's funds, distributing false account statements, and making material misrepresentations to the investors. In addition, Dormagen commingled pool assets with non-pool property and failed to send the pool participants the requisite monthly account statements from a futures commission merchant. By such conduct Dormagen violated Sections 4b(a)(i)-(iii), 4c(b), and 4o(1) of the Commodity Exchange Act, as amended ("Act"), 7 U.S.C. 6b(a)(i)-(iii), 6c(b), and 6o(1) (1994), and Sections 4.13(b)(2)(i)(A)-(B), 4.20(c), and 33.10 of the Regulations promulgated thereunder, 17 C.F.R. 4.13(b)(2)(i)(A)-(B), 4.20(c), and 33.10 (1999).

2. In addition, between March 1996 and July 1999, Defendant Dormagen while acting as an unregistered futures commission merchant ("FCM"), defrauded five individuals who gave him approximately $165,000 to trade commodity futures and options on their behalf. Dormagen acted as an agent of Delta Financial Corporation ("Delta") with respect to one of these individuals, thus making Delta vicariously liable for Dormagen's fraud to that individual, pursuant to Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4, and Section 1.2 of the Regulations, 17 C.F.R. 1.2. Dormagen and Delta misappropriated and converted customer funds, distributed false account statements and commingled their funds with the funds other non-futures customers, thereby violating Sections 4b(a)(i)-(iii), 4c(b), and 4d(1) and (2) of the Act, 7 U.S.C. 6b(a)(i)-(iii), 6c(b), and 6d(1) and (2), and Regulation 33.10, 17 C.F.R. 33.10. In addition, Dormagen defrauded these customers while acting as a commodity trading advisor ("CTA"), thereby violating Section 4o(1) of the Act, 7 U.S.C. 6o(1).

3. In addition, between February 1998 and March 1999, Dormagen defrauded another customer by using $125,000 of this customer's $500,000 investment to trade futures on his behalf without first obtaining the customer's authorization. By such conduct, Dormagen violated Sections 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i).

4. Accordingly, the Commodity Futures Trading Commission ("Commission") brings this action pursuant to Section 6c of the Act, 7 U.S.C. 13a-1 (1994), to enjoin Dormagen and Delta's unlawful acts and practices and to compel their compliance with the Act and the Commission's Regulations. In addition, the Commission seeks disgorgement of defendants' ill-gotten gains, restitution to customers for damages proximately caused by defendants' violations, civil monetary penalties, and such other relief as this Court may deem necessary and appropriate.

5. Unless restrained and enjoined by this Court, Dormagen and Delta are likely to continue to engage in acts and practices alleged in this Complaint and similar acts and practices, as more fully described below.

II.

JURISDICTION AND VENUE

6. This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7 U.S.C. 13a-1, which provides that, whenever it shall appear to the Commission that any person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation, or order promulgated thereunder, the Commission may bring an action against such person to enjoin such practice or to enforce compliance with the Act.

7. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. 13a-1(e) (1994), because the acts and practices in violation of the Act occurred within this District, among other places.

III.

THE PARTIES

8. Plaintiff Commission is a federal independent regulatory agency charged with the administration and enforcement of the Act and the Regulations.

9. Defendant Robert L. Dormagen resides at 345 Southgate Drive, Crossville, Tennessee 38555. From March 1996 through March 1999, Dormagen resided at 712 Crooks Avenue, Ravenswood, West Virginia. From March 1999 until approximately December 1999 he resided at 236 W. Main Street, Batesland, South Dakota. Dormagen has never been registered with the Commission in any capacity.

10. Defendant Delta Financial Corporation is a West Virginia corporation that was located at 200 Walnut Street, Suite 101, Ravenswood, West Virginia 26164. At all relevant times, Dormagen was the President and a principal of Delta. Delta has never been registered with the Commission in any capacity.

IV.

RELEVANT STATUTES AND REGULATIONS

11. A commodity pool is any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading commodity interests. 17 C.F.R. 4.10(d)(1). A CPO is a person engaged in a business in the nature of an investment trust, syndicate or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others funds, securities, or property, either directly or through capital contributions, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market. Section 1a(4) of the Act, 7 U.S.C. 1a(4).

12. A commodity pool operator is required to be registered with the Commission unless it is exempted from registration by statute or regulation. Section 4m(1) of the Act, 7 U.S.C. 6m(1) (1994). Dormagen was exempt from registration as a CPO pursuant to Commission Regulation 17 C.F.R. 4.13 (1999). Exempt CPOs are nevertheless prohibited from violating the antifraud provisions of the Act and the Commission's Regulations, are prohibited from commingling pool funds with non-pool property, and are also required to provide pool participants with a copy of the monthly account statement from a registered futures commission merchant. Commission Regulations 4.13(b)(2)(i)(A)-(B), 4.15, and 4.20(c), 17 C.F.R. 4.13(b)(2)(i)(A)-(B), 4.15, and 4.20(c) (1999).

13. A futures commission merchant is an individual, association, partnership, corporation, or trust that (A) is engaged in soliciting or in accepting orders for the purchase or sale of any commodity futures contract or on subject to the rules of any contract market; and (B) in or in connection with such solicitation or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom. Section 1a(12) of the Act, 7 U.S.C. 1a(12) (1994). An FCM is required to be registered with the Commission pursuant to Section 4d(1) of the Act, 7 U.S.C. 4d(1) (1994).

14. A commodity trading advisor is any person who, for compensation or profit, engages in the business of advising others, either directly or through publications, writings or electronic media, as to the value of or the advisability of trading in any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of any contract market. Section 1a(5) of the Act, 7 U.S.C. 1a(5).

V.

FACTS

A. Dormagen's Commodity Pool Activities

15. From at least July 1996 through July 1999, Dormagen was the exempt CPO and sole General Partner of a commodity pool called Capital Group III, L.P. ("CGIII"), a West Virginia limited partnership. Dormagen filed his notice of exemption from registration as a CPO for CGIII with the Commission on September 26, 1996.

16. Between July 1996 and January 1997, Dormagen solicited eleven investors to become participants in the CGIII pool. Investors became pool participants by purchasing limited partnership units in CGIII, which were valued at $1,000 per unit. The ostensible minimum investment was 10 units; however, one pool participant purchased only five units. CGIII attracted a total of eleven pool participants who invested a total of approximately $175,300.

17. Seven pool participants invested in CGIII by first opening and funding an account at Sterling Trust Co. ("Sterling"), a self-directed individual retirement trust account company, and then directing Sterling to purchase units in CGIII for themselves as accountholders. Sterling then sent a check to Dormagen for each accountholder, indicating to Dormagen how many units should be allocated to each accountholder. Each quarter, Dormagen sent Sterling quarterly reports for these seven accountholders, reporting the purported value of each unit of CGIII, the number of units each accountholder owned, and the total account balance for each accountholder. Sterling then prepared its own quarterly reports for these seven accountholders on which it simply repeated the information it received from Dormagen regarding CGIII.

18. Dormagen entered into a limited partnership agreement with CGIII investors in which he falsely represented that he was registered as an Associated Person with the National Futures Association ("NFA"). In fact, Dormagen has never been registered with the NFA in any capacity.

19. Dormagen represented to the pool participants in the CGIII Limited Partnership Agreement that he would use the pool's funds to trade commodity futures and options contracts listed on various U.S. futures exchanges. The CGIII limited partnership agreement also represented that after $50,000 had been raised, all existing funds and any subsequent funds obtained by the pool would be transferred to a segregated trading account held by an authorized "futures clearing firm" for the account of CGIII.

20. Contrary to the CGIII limited partnership agreement and Dormagen's representations to the pool participants, however, Dormagen used only $50,000 of the approximately $175,300 of pool funds to trade commodity futures and options. CGIII had various accounts at two FCM clearing firms, LFG, LLC ("LFG") and LIT First Options Chicago ("LIT"), all of which were controlled solely by Dormagen.

21. Dormagen misappropriated, converted, and commingled with non-pool property the remaining $125,300 of the pool's funds by, among other things, paying personal and business expenses with those funds. Of those funds, Dormagen withdrew at least $12,000 from CGIII's bank account for deposit into his personal bank account, and also withdrew approximately $1,575 in cash, all without the knowledge of the pool participants. Further, Dormagen withdrew at least $18,200 from CGIII's bank account and deposited it into Defendant Delta's bank account. Dormagen thereby commingled at least $31,775 of the pool's funds with non-pool property.

22. Dormagen also misappropriated, converted, and commingled with non-pool property some of the pool funds deposited into FCM accounts for futures and options trading. In August 1997, Dormagen withdrew $8,200 from one of CGIII's commodity futures trading accounts and deposited those funds directly into his personal bank account. In November 1997, Dormagen withdrew $24,264 from the same commodity futures trading account and deposited it into CGIII's bank account, from which the funds were later misappropriated, converted, and commingled with non-pool property.

23. Dormagen never informed the pool participants of these withdrawals from CGIII's commodity futures trading account. Instead, Dormagen sent the pool participants a letter on or about November 21, 1997, falsely stating that CGIII had suffered a "drawdown" (by which he apparently meant a severe trading loss) of 83% of capital on October 27, 1997. In fact, no such severe trading losses occurred in CGIII's futures account on or about October 27, 1997.

24. From December 1996 through April 1999, Dormagen distributed or caused the distribution of monthly, and later quarterly, account statements to the CGIII pool participants that purported to state the number of units that pool participant owned, the value per unit of CGIII, and the account balance for that pool participant.

25. These periodic statements were false, in that they indicated that Dormagen was trading all of the pool's funds in a commodity futures trading account. In fact, Dormagen was only trading a small portion of the pool's funds. Dormagen created CGIII unit values expressed in these statements that were unrelated to the actual performance of CGIII's commodity futures trading account. Moreover, Dormagen distributed statements reporting trading after January 1998 that were false, because Dormagen had closed CGIII's futures trading accounts in that month (with $27,000 in net trading losses) and did not open any futures trading account in CGIII's name thereafter.

26. Dormagen failed to provide the pool participants with a copy of the monthly account statement from a registered FCM as required by Commission Regulation 4.13(b)(2)(i)(A)-(B), 17 C.F.R. 4.13(b)(2)(i)(A)-(B).

B. Dormagen's FCM and CTA Activities

27. In March 1996, Dormagen solicited and accepted $12,000 from one customer to trade commodity futures and options on his behalf through a joint commodity futures trading account in his and the customer's names. Initially, this customer's funds were deposited in the account of Capital Asset Management & Research Corporation ("CAM&RC"), a West Virginia corporation founded and controlled by Dormagen. Dormagen transferred the funds to his own bank account a few days later. Between March 1996 and at least January 1998, Dormagen sent that customer monthly or bimonthly letters, memoranda, and other correspondence purporting to show how that customer's futures account was performing. These reports were false and misleading, in that Dormagen had never set up a joint futures account with that customer's funds, and in that they reported false account balances. Dormagen misappropriated and converted this customer's funds and used them to pay for personal or business expenses and/or to trade futures in Dormagen's personal futures account.

28. In March 1996, Dormagen solicited and accepted $18,000 from another customer to trade commodity futures and options on his behalf through a joint futures trading account in Dormagen's and the customer's names. Initially, this customer's funds were deposited in the CAM&RC bank account, but shortly thereafter Dormagen transferred the funds to his own bank account before transferring $15,000 to the joint futures trading account. Between March 1996 and September 1998, Dormagen sent that customer monthly or bimonthly letters, memoranda, and other correspondence purporting to show how that customer's futures and options account was performing. The second monthly report was false, in that Dormagen reported a profit in the account, when, in fact, the account had suffered trading losses. In June 1996, without informing the customer, Dormagen closed the joint futures account and deposited the balance of the funds into Dormagen's personal bank account, where he later used them to pay for personal and business expenses. The June 1996 through September 1998 monthly reports were false because Dormagen reported trading activity in a joint futures and options account when, in fact, Dormagen had already closed that account and did not open another with this customer's funds. Dormagen returned approximately $12,378 to the customer in September 1998, drawing the funds from a Delta securities account.

29. In March 1996, Dormagen solicited and accepted $10,000 from a third customer to trade commodity futures and options on her behalf through a joint futures account. Dormagen opened up a joint futures and options account in his and the customer's name at an FCM. This customer's funds were first deposited in CAM&RC's bank account, but Dormagen soon transferred those funds to his own bank account. Dormagen deposited into the joint futures account $8,000 of the customer's funds. From April 1996 through September 1998, Dormagen sent the customer monthly or bimonthly account statements or reports purporting to show how her account was performing. The first monthly report was false because Dormagen reported a profit when, in fact, the account suffered a loss. In May 1996 Dormagen closed this account (with a debit) without informing the customer, and never re-opened another futures account with her funds. The account reports Dormagen sent this customer from June 1996 through September 1998 were false because Dormagen reported trading activity in her futures and options account when, in fact, the account had been closed since May 1996 and all funds had been lost. In September 1998, Dormagen returned $4,378 to this customer, drawing the funds from Delta's securities account.

30. In April 1996, Dormagen solicited and accepted $30,000 from a couple to trade commodity futures and options on their behalf. The agreement between the couple and Dormagen called for Dormagen to open a joint futures and options account, although Dormagen never did so. Instead, Dormagen misappropriated and converted the couple's funds to trade futures and options in his own personal futures account and/or to pay for personal or business expenses. Between May 1996 and May 1999, Dormagen sent the couple monthly statements indicating how the account was purportedly performing. These statements and reports were false and misleading because the values reported therein were phony and had no relation to any actual futures trading. Dormagen misappropriated, commingled with non-customer property, and/or converted all of the couple's funds.

31. In June 1997, Dormagen, acting as an agent and principal of Delta, solicited and accepted $100,000 from a fifth customer to trade commodity futures and options on his behalf. This customer's funds were deposited into Delta's bank account, which Dormagen controlled. However, Dormagen only used approximately $30,000 of this customer's funds to trade futures and options through Delta's futures account at LIT, a registered FCM. Delta's futures account contained funds commingled from other customers. Dormagen misappropriated and converted the remainder of this customer's funds to pay for personal or business expenses. Dormagen also sent this customer monthly account statements, sometimes via e-mail, indicating how his account was purportedly performing. These statements were false because Dormagen did not trade all of this customer's funds and created phony account values to report to the customer. Dormagen returned approximately $40,556 to this customer.

C. Additional Misuse of Customer Funds

32. In February or March 1998, Dormagen, acting as an agent and principal of Delta, solicited and accepted $500,000 from a British national who resides in Hong Kong to become a limited partner in Delta Trading Co., L.P. ("Delta Trading"), a West Virginia limited partnership. Delta was the general partner of Delta Trading. Delta Trading's limited partnership agreement stated that its activities would be confined to trading stocks and stock options. However, Dormagen used at least $125,000 of this customer's funds to trade commodity futures through Delta's futures account at LIT. These trades were unauthorized by the customer. Although Dormagen sent the customer e-mails and other correspondence indicating the ostensible performance of the customer's account, Dormagen defrauded and deceived this customer by failing to disclose that he had used some of his funds to engage in futures trading.

VI.

VIOLATIONS OF THE COMMODITY EXCHANGE ACT

COUNT ONE

VIOLATIONS OF SECTIONS 4b(a)(i)-(iii) OF THE ACT:
FRAUD, DECEIT AND DISTRIBUTING FALSE ACCOUNT STATEMENTS

33. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

34. From at least July 1996 through July 1999, Dormagen: (i) cheated or defrauded or attempted to cheat and defraud other persons; (ii) willfully made or caused to be made to other persons false reports or statements, or willfully entered or caused to be entered for other persons false records; and (iii) willfully deceived or attempted to deceive other persons, in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of any other persons, where such contracts for futures delivery were or could be used for the purposes set forth in Section 4b(a) of the Act, 7 U.S.C. 6b(a), all in violation of Section 4b(a)(i)(ii) and (iii) of the Act, 7 U.S.C. 6b(a)(i)(ii) and (iii).

35. By knowingly misappropriating and/or converting the pool participants' and other commodity futures customers' funds, Dormagen violated Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii).

36. During the same period, Dormagen willfully made and distributed, or caused to be made and distributed, false and misleading statements and reports to the pool participants and other futures customers in violation of Section 4b(a)(ii) of the Act, 7 U.S.C. 6b(a)(ii). These account statements and reports were false and misleading in that Dormagen created reported false account balances and phony profits and created the false impression that Dormagen was trading all of the pool and non-pool customers' funds in commodity futures and options.

37. By knowingly misrepresenting his registration status with the NFA in the CGIII limited partnership agreement and by sending or causing to be sent on or about November 21, 1997 a letter to the CGIII pool participants which falsely claimed the pool had suffered trading losses on October 27, 1997, Dormagen violated Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii).

38. Between at least March 1998 and March 1999, Dormagen violated Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. 6b(a)(i) and (iii), by engaging in unauthorized futures trades.

39. Delta is liable for the foregoing acts and omissions of its agent, Dormagen, with respect to certain of his customers, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4, and Section 1.2 of the Regulations, 17 C.F.R. 1.2.

40. Each material misrepresentation or omission, each false report or statement, and each willful deception made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4b(a)(i)-(iii) of the Act, 7 U.S.C. 6b(a)(i)-(iii).

COUNT TWO

VIOLATIONS OF SECTION 4c(b) OF THE ACT
AND REGULATION 33.10: OPTIONS FRAUD

41. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

42. From at least July 1996 through July 1999, Dormagen: (a) cheated or defrauded or attempted to cheat and defraud other persons; (b) willfully made or caused to be made to other persons false reports or statements, or willfully entered or caused to be entered for other persons false records; and (c) willfully deceived or attempted to deceive other persons, in or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of, commodity option transactions, in violation of Section 4c(b) of the Act, 7 U.S.C. 6c(b), and Section 33.10 of the Regulations, 17 C.F.R. 33.10.

43. Dormagen solicited and accepted funds from the CGIII pool investors and the five individual, non-pool customers to trade both commodity futures and options. Dormagen traded commodity options, in addition to commodity futures, in his accounts, the accounts of CGIII and Delta, and the joint futures and options accounts that he maintained.

44. Because Dormagen's acts and omissions which constitute violations of Section 4b(a)(i)-(iii), 7 U.S.C. 6b(a)(i)-(iii), were also in connection with commodity options transactions, Dormagen also violated Section 4c(b) of the Act, 6 U.S.C. 6c(b), and Regulation 33.10, 17 C.FR. 33.10.

45. Delta is liable for the foregoing acts and omissions of its agent, Dormagen, with respect to certain of his customers, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4, and Section 1.2 of the Regulations, 17 C.F.R. 1.2.

46. Each material misrepresentation or omission, each false report or statement, and each willful deception made during the relevant time period, including but not limited to those specifically alleged herein, is alleged as a separate and distinct violation of Section 4c(b) of the Act, 6 U.S.C. 6c(b), and Regulation 33.10, 17 C.FR. 33.10.

COUNT THREE

VIOLATIONS OF SECTION 4o(1) OF THE ACT:
CPO and CTA FRAUD

47. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

48. From at least July 1996 through July 1999, Dormagen, while acting as a CPO and a CTA, employed a device, scheme or artifice to defraud pool participants and other individual investors in violation of Section 4o(1)(A), 7 U.S.C. 6o(1)(A).

49. From at least July 1996 through July 1999, Dormagen, while acting as a exempt CPO and a CTA, has engaged in transactions, practices or courses of business which operated as a fraud or deceit upon pool participants and other individual investors in violation of Section 4o(1)(B) of the Act, 7 U.S.C. 6o(1)(B).

50. By knowingly misappropriating and converting the CGIII pool participants' funds, including using pool funds to pay for personal and business expenses, Dormagen violated Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B), while acting as a CPO.

51. By knowingly misappropriating and converting the funds of individual non-pool investors, including using their funds to pay for personal and business expenses, Dormagen violated Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B), while acting as a CTA.

52. By making and distributing, or causing to be made and distributed, false account statements and reports to the CGIII pool participants and to the other individual investors, Dormagen violated Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B), while acting as a CPO and a CTA.

53. By knowingly misrepresenting his registration status with the NFA in the CGIII limited partnership agreement and by sending or causing to be sent on or about November 21, 1997 a letter to the CGIII pool participants which falsely claimed the pool had suffered trading losses on October 27, 1997, Dormagen violated Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B), while acting as a CPO.

54. Each material misrepresentation or omission, each act of misappropriation and conversion, and each false report or statement made during the period is alleged as a separate and distinct violation of Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. 6o(1)(A) and (B).

COUNT FOUR

VIOLATION OF REGULATION 4.13(b)(2)(i)(A)-(B):
FAILURE TO FURNISH FCM ACCOUNT
STATEMENTS TO POOL PARTICIPANTS

55. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

56. From at least July 1996 through July 1999, Dormagen, while acting as a CPO, failed to furnish to each participant in the pool a copy of the monthly statement for the pool that was received from a futures commission merchant, in violation of Section 4.13(b)(2)(i)(A)-(B) of the Regulations, 17 C.F.R. 4.13(b)(2)(i)(A)-(B).

57. Each instance during the period where Dormagen failed to furnish to each pool participant a copy of the monthly statement for the pool that was received from a futures commission merchant is alleged as a separate and distinct violation of Section 4.13(b)(2)(i)(A)-(B) of the Regulations, 17 C.F.R. 4.13(b)(2)(i)(A)-(B).

COUNT FIVE

VIOLATION OF REGULATION 4.20(c):
COMMINGLING POOL PROPERTY WITH NON-POOL PROPERTY

58. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

59. From at least July 1996 through July 1999, Dormagen, while acting as a CPO, commingled commodity pool property with non-pool property, in violation of Section 4.20(c) of the Regulations, 17 C.F.R. 4.20(c). Dormagen made withdrawals from the CGIII pool's bank account and futures account and deposited those funds in his own bank account and that of Defendant Delta, thereby commingling the commodity pool's funds with non-pool funds.

60. Each act of commingling by Dormagen, while acting as a CPO, during the period is alleged as a separate and distinct violation of Section 4.20(c) of the Regulations, 17 C.F.R. 4.20(c).

COUNT SIX

VIOLATION OF SECTION 4d(1) AND (2) OF THE ACT:
ACTING AS AN UNREGISTERED FCM
AND COMMINGLING CUSTOMER FUNDS:

61. The allegations set forth in paragraphs 1 through 32 are realleged and incorporated herein by reference.

62. During the period March 1996 through June 1997, Dormagen, without being registered as an FCM, solicited and/or accepted orders for the purchase of any commodity for future delivery on or subject to the rules of any contract market and, in or in connection with such solicitation or acceptance of orders, he accepted money, securities, or property (or extended credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that resulted or may have resulted therefrom, in violation of Section 4d(1) of the Act, 7 U.S.C. 6d(1).

63. During the period March 1996 through July 1999, Dormagen, while acting as an unregistered FCM, failed to separately account for the funds that customers provided to Dormagen, and Dormagen commingled those customer funds with his own, with Delta's, and with the funds of other customers, in violation of Section 4d(2) of the Act, 7 U.S.C. 6d(2).

64. Delta is liable for the foregoing acts and omissions of its agent, Dormagen, with respect to one customer, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4, and Section 1.2 of the Regulations, 17 C.F.R. 1.2.

65. Each individual from whom Dormagen and Delta solicited and/or accepted orders for the purchase of any commodity for future delivery on or subject to the rules of any contract market and, in or in connection with such solicitation or acceptance of orders, and from whom he accepted money, securities, or property (or extended credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that resulted or may have resulted therefrom, is alleged as a separate and distinct violation of Section 4d(1) of the Act, 7 U.S.C. 6d(1).

66. Each instance where Dormagen and Delta, while acting as unregistered FCMs, during the period failed to separately account for the funds that customers provided to them, and commingled those customer funds with their own and with the funds of other customers, is alleged as a separate and distinct violation of Section 4d(2) of the Act, 7 U.S.C. 6d(2).

VII.

RELIEF REQUESTED

WHEREFORE, plaintiff respectfully requests that this Court enter an order of permanent injunction:

A. restraining and enjoining defendants and any of their affiliates, agents, servants, employees, successors, assigns, attorneys, and persons in active concert with them who receive actual notice of such order by personal service or otherwise, from directly or indirectly:

1. violating Section 4b(a)(i)-(iii) of the Act, 7 U.S.C. 6b(a)(i)-(iii), by, in or in connection with any order to make, or the making of any contract or sale of any commodity for future delivery (including but not limited to foreign currencies), made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (A) hedging any transaction in interstate commerce in such commodity or the products or by products thereof, or (B) determining the price basis of any transaction in interstate commerce in such commodity, or (C) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof-

a) cheating or defrauding or attempting to cheat or defraud other persons;

b) willfully making or causing to be made to other persons any false report or statement , or willfully entering or causing to be entered for such persons any false records; or

c) willfully deceiving or attempting to deceive other persons by any means whatsoever in regard to any such order or contract or the disposition or execution of any such order or contract, or in regard to any act of agency performed with respect to such order or contract for such person.

2. violating Section 4c(b) of the Act, 7 U.S.C. 6c(b), and Regulation 33.10, 17 C.F.R. 33.10, by directly or indirectly: (a) cheating or defrauding or attempting to cheat or defraud any other person; (b) making or causing to be made to any other person any false report or statement thereof or causing to be entered for any person any false record thereof; and (c) deceiving or attempting to deceive any other person by any means whatsoever, in or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of, any commodity option transaction;

3. violating Section 4o(1) of the Act, 7 U.S.C. 6o(1), by, while acting as a CPO and a CTA, employing devices, schemes or artifices to defraud commodity pool participants or prospective participants, and engaging in transactions, practices or courses of business that operate as a fraud or deceit upon commodity pool participants or prospective participants;

4. violating Section 4.13(b)(2)(i)(A)-(B) of the Regulations, 17 C.F.R. 4.13(b)(2)(i)(A)-(B), by failing to deliver to each participant in a commodity pool, that either defendant operates or intends to operate, a copy of the monthly statement for the pool received from a futures commission merchant pursuant to Section 1.33 of the Regulations;

5. violating Section 4.20(c) of the Regulations, 17 C.F.R. 4.20(c), by commingling the property of any pool that either defendant operates intends to operate with the property of any other person; and

6. violating Section 4d(1)-(2) of the Act, 7 U.S.C. 6d(1)-(2), by acting as an unregistered futures commission merchant and commingling customer funds;

B. directing defendants:

1. to make an accounting of all assets and liabilities of defendants Dormagen and Delta, together with all funds received and paid out by defendants Dormagen and Delta, in or in connection with all commodity pool operations or commodity futures and options transactions, from the date of their receipt until the date of such accounting; together with an accounting of all salaries, commission, fees, loans, and other disbursements of money and property of any kind from defendants Dormagen or Delta, in or in connection with any commodity pool operations or commodity futures or options transactions from the date of the beginning of those operations and transactions to and including the date of such accounting, and that such accounting be accomplished under the supervision of such person as the Court may appoint or designate, or upon such terms and conditions as the Court may deem appropriate. Such accounting shall enumerate:

a. all funds, securities, assets or other property currently owned or controlled (legally, equitably or otherwise) directly or indirectly by defendants Dormagen and Delta, whether individually or jointly;

b. all funds, securities, assets, and other property received directly or indirectly by defendants Dormagen and Delta, whether individually or jointly, describing the source, amount, disposition, and current location of each listed item;

c. the name and last known address of each bailee, debtor or other person or entity currently holding any funds, securities, assets or other property owned or controlled (legally, equitably, or otherwise) by defendants Dormagen and Delta, whether individually or jointly; and

d. the name and financial condition (including assets, liabilities, revenues and expenses) of each entity directly or indirectly owned or controlled by defendants Dormagen and Delta, whether individually or jointly;

3. to disgorge to any officer appointed and directed by the Court all benefits received including, but not limited to, salaries, commissions, loans, fees, revenues and profits derived, directly or indirectly, from acts or practices which constitute violations of the Act or Regulations, as described herein;

4. to make restitution by making whole each and every customer or participant whose funds were received and utilized by the defendants in violation of the provisions of the Act and Regulations, as described herein;

5. to pay civil penalties, to be assessed by the Court separately against each defendant, in amounts not to exceed $110,000 or triple the monetary gain to them for each violation of the Act, as described herein; and

C. providing for such other and further remedial ancillary relief as this Court may deem necessary and appropriate.

Date: July 3, 2000 Respectfully submitted,
__________________________
W. Derek Shakabpa, DC Bar No. 444168
Attorneys for Plaintiff

Commodity Futures Trading Commission

Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
(202) 418-5352
(202) 418-5538 (facsimile)
Local Counsel:
_______________________
Gary Call, Esq.
Office of U.S. Attorney Rebecca Betts
U.S. Courthouse, Room 4000
300 Virginia Street East
Charleston, West Virginia 25301
(304) 345-2200