UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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)
COMMODITY FUTURES TRADING COMMISSION )
Plaintiff, )
) CIVIL ACTION No. 97-CV-4973 (SJ)
v. )
) Hon. Sterling Johnson, Jr.
OSCAR A. KLITIN and ) Hon. Robert Levy
KLITIN ASSOCIATES II, )
a New York Limited Partnership, )
Defendants. )
)
________________________________________________ )

ORDER OF PERMANENT INJUNCTION

AGAINST OSCAR A. KLITIN AND KLITIN ASSOCIATES II, L.P.

Plaintiff Commodity Futures Trading Commission (the "Commission") filed a summons and complaint herein (the "Complaint") against Oscar A. Klitin ("Klitin") and Klitin Associates II ("Klitin Associates") (collectively the "Defendants") on August 26, 1997, seeking injunctive and other equitable relief, as well as the imposition of civil monetary penalties, for violations of the Commodity Exchange Act, as amended, 7 U.S.C. 1 et seq. (1996) (the "Act") and the regulations promulgated pursuant to the Act, 17 C.F.R. 1 et seq. (1997) (the "Regulations"). The Court entered a Statutory Ex Parte Restraining Order on August 26, 1997, and a preliminary injunction on September 5, 1997 after notice to and with the consent of the Defendants.

To effect settlement of the matters alleged in the Complaint in this action without a trial on the merits or any further judicial proceedings, the Defendants consent to the entry of this order. The Defendants also acknowledge service upon them of the Complaint, admit jurisdiction of this Court over them and the subject matter of this action, admit that venue lies properly with this Court, and waive the entry of findings and conclusions of law in this action pursuant to Rule 52 of the Federal Rules of Civil Procedure. In addition, the Defendants waive all claims which the Defendants may possess under the Equal Access to Justice Act, 5 U.S.C. 504 (1994) and 28 U.S.C. 2412 (1994), as amended by Pub. L. No. 104-121, 231-32, 110 Stat. 862-63, and Part 148 of the Regulations, 17 C.F.R. 148.1 et seq., relating to, or arising from, this action. Furthermore, Defendants waive any claim of Double Jeopardy based upon the institution of this proceeding or the entry in this proceeding of any order imposing a civil monetary penalty or any other relief; provided, however, that nothing herein constitutes a waiver of Klitin's right under the Fifth Amendment to the United States Constitution not to be compelled to be a witness against himself.

The Defendants also consent to the continued jurisdiction of the Court for the purpose of enforcing the terms and conditions of this order of Permanent Injunction ("Order") and for any other purposes relevant to the case, and agree to respond to or cooperate in any discovery in any matters arising from this action; provided, however, that the Defendants reserve all rights under the Federal Rules of Civil Procedure and any statute, rule or regulation governing discovery to seek an appropriate order from the Court to protect against discovery abuse or assert a privilege.

The Defendants further affirm that the Defendants have consented to this Order voluntarily, and that no promise or threat has been made by the Commission or any member, officer, agent or representative thereof, or by any other person, to induce the Defendants to consent to this Order, other than as set forth specifically herein.

The Defendants, by consenting to the entry of this Order, neither admit nor deny any of the allegations of the Complaint except as to jurisdiction and venue. By this language, the Defendants agree that neither the Defendants nor any employees, agents or representatives of the Defendants acting under the Defendants' authority or control shall take any action or make any public statement denying, directly or indirectly, any allegation in the Complaint or creating, or tending to create, the impression that the Complaint is without factual basis; provided, however, that nothing in this provision affects the Defendants' testimonial obligations, or the Defendants' right to take legal positions, in other litigation to which the Commission is not a party. The Defendants will undertake all steps necessary to assure that all of the Defendants' agents and employees understand and comply with this agreement.

Klitin acknowledges and agrees that the Court is not imposing a civil monetary penalty pursuant to 7 U.S.C. 13a-1(d)(1) conditioned upon the accuracy and completeness of Klitin's sworn representations to the Commission concerning his assets, income, liabilities, and net worth, as described in his sworn Statement of Financial Condition dated July 21, 1998, and other documents submitted by Klitin with the aforesaid Statement of Financial Condition. Klitin further consents that if at any time following the entry of this Order the Commission obtains information indicating that Klitin's representations to the Commission concerning his financial condition made in his sworn Statement of Financial Condition dated July 21, 1998 (but not any attachments thereto) were fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, the Commission may, at its sole discretion and without informing Klitin in advance of starting legal action, may file a petition with the Court for an order imposing a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by Klitin was fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, and the amount of civil monetary penalty to be imposed. In any such petition, the Commission may move the Court to consider all available remedies, including, but not limited to, ordering Klitin to pay funds or assets, or imposing sanctions for contempt of the Court's Final Judgment, and the Commission may also request additional discovery as part of such a petition. Klitin may not, by way of defense to such petition, challenge the validity of this Order or a final judgment herein, contest the allegations in the Complaint filed by the Commission or assert that payment of a civil monetary penalty should not be ordered.

Being fully advised in the premises but without adjudicating the facts, the Court, based in part on Klitin's sworn Statement of Financial Condition dated July 21, 1998, and other documents submitted by Klitin with the aforesaid Statement of Financial Condition, finds that there is good cause for the entry of this Order against the Defendants. This Order fully disposes of all controverted issues between the parties.

THEREFORE, pursuant to Section 6c of the Act, 7 U.S.C. 13a-1, IT IS ORDERED THAT:

The Defendants and any person insofar as he or she is acting in the capacity of officer, agent, servant, employee, or attorney of the Defendants, and persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are PERMANENTLY ENJOINED, from directly or indirectly:

1. While operating as a commodity pool operator ("CPO"), an associated person ("AP") of a CPO, a commodity trading advisor ("CTA"), or and AP of a CTA, by use of the mails or any means or instrumentality of interstate commerce,

a. Employing any device, scheme, or artifice to defraud any client or participant or prospective client or participant, in violation of Section 4o(a)(A) of the Act, 7 U.S.C. 6o(a)(A); or

b. Engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant, in violation of Section 4o(1)(B) of the Act, 7 U.S.C. 6o(1)(B).

2. Converting to either of the Defendants' own use or the use of another, any money, securities, or property having a value in excess of $100 (one hundred dollars), which was received by them or any of their agents or employees, to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the Defendants' business, in violation of Section 9(a) of the Act, 7 U.S.C. 13(a)(1);

3. Failing to furnish to pool participants account statements and annual reports including complete information as to the current status of all trading accounts in which the participants have an interest, in violation of Section 4n(4) of the Act, 7 U.S.C. 6n(4), and Regulation 4.22, 17 C.F.R. 4.22 for any quarter commencing after the quarter during which this Order is entered;

4. Failing to disclose to pool participants material business dealings with the pool in violation of Section 4.22(a)(3) of the Regulations, 17 C.F.R. 4.22(a)(3), for any reporting period commencing after the period during which this Order is entered;

5. Failing to distribute to pool participants an Account Statement on a quarterly basis in violation of Section 4.22(b) of the Regulations, 17 C.F.R. 4.22(b), for any quarter commencing after the quarter during which this Order is entered; and

6. Failing to distribute to pool participants and file with the Commission an Annual Report within 90 calendar days of the end of the pool's fiscal year in violation of Section 4.22(c) of the Regulations, 17 C.F.R. 4.22(c), for any fiscal year commencing after the fiscal year during which this Order is entered.

IT IS FURTHER ORDERED that the Defendants and any person insofar as he or she is acting in the capacity of officer, agent, servant, employee, or attorney of the Defendants, and persons in active concert or participation with them who receive actual notice of this Order, are PERMANENTLY ENJOINED from directly or indirectly soliciting or accepting any new clients or new participants for commodity futures or commodity options trading or accepting any new deposits of funds from existing clients or acting in any capacity that requires registration with the Commission.

IT IS FURTHER ORDERED that the Defendants and any person insofar as he or she is acting in the capacity of officer, agent, servant, employee, or attorney of the Defendants, and persons in active concert or participation with them who receive actual notice of this Order, are PERMANENTLY ENJOINED from directly or indirectly engaging in trading, on or subject to the rules of a contract market subject to Commission regulation.

IT IS FURTHER ORDERED that all contracts and other agreements between the persons listed on Exhibit A and the Defendants are hereby rescinded.

IT IS FURTHER ORDERED that the Klitin shall not transfer or cause others to transfer funds or other property to the possession, custody, or control of any member of his family or any other person for the purpose of concealing such funds or property from the Court or the Commission.

IT IS FURTHER ORDERED that Klitin shall pay disgorgement in the amount of $83,789.69 and pre-judgment interest in the amount of $31,983.17 by paying into the Court $115,772.86 within ten days of the entry of this Order.

IT IS FURTHER ORDERED THAT no civil monetary penalties shall be imposed against either of the Defendants; provided, however, that if at any time following the entry of this Order the Commission obtains information indicating that Klitin's representations to the Commission concerning his financial condition made in his sworn Statement of Financial Condition dated July 21, 1998 (but not any attachments thereto) were fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, the Commission may, at its sole discretion and without informing Klitin in advance of starting legal action, may file petition with this Court for an order imposing a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by Klitin was fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, and the amount of civil monetary penalty to be imposed. In its petition, the Commission may move this court to consider all available remedies, including, but not limited to, ordering Klitin to pay funds or assets, or imposing sanctions for contempt of this Order, and the Commission may also request additional discovery as part of such a petition. Klitin may not, by way of defense to such petition, challenge the validity of his consent to the entry of this Order, contest the allegations in the Complaint filed by the Commission, or assert that payment of a civil monetary penalty should not be ordered.

Upon being served with copies of this Order after entry by the Court, the Defendants shall sign acknowledgements of such service and serve such acknowledgements on the Commission within seven (7) days.

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this cause to assure compliance with this ORDER OF PERMANENT INJUNCTION.

DONE AND ORDERED, this 2nd day of August, 1999.

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Hon. Sterling Johnson, Jr.
United States District Judge

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Consented to and approved for entry: COMMODITY FUTURES TRADING COMMISSION
ERNESTO MARRERO, JR.
Regional Counsel

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By: By:
Oscar A. Klitin Karl D. Cooper (KC 8602)
As general partner of Klitin Associates II, L.P. Trial Attorney
and in his personal capacity Division of Enforcement
One World Trade Center
3 Denton Road Suite 3747
Kings Point, New York 11024 New York, New York 10048
(516) 487-1719 (212) 466-2027
Counsel for Plaintiff
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