CFTC News Release 4365-00 (CFTC Docket No. 97-4)
For Release: February 17, 2000

CFTC ACCEPTS SETTLEMENT OFFERS OF LEXUS FINANCIAL GROUP, INC., MARK LEE SINGER AND DAVID ALAN LUGER IN CONNECTION WITH THE FRAUDULENT SOLICITATION OF CUSTOMERS

CFTC Order Finds that Lexus, Singer, and Luger Committed Fraud in Soliciting Customers to Trade Options on Commodity Futures Contracts, Revokes Their Registrations, and Prohibits Them from Trading; Requires Singer and Luger to Pay $6.8 Million in Restitution To Defrauded Customers

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced the issuance today of an order accepting offers of settlement from Lexus Financial Group, Inc., Mark Lee Singer, and David Alan Luger, all from the south Florida area, in connection with a complaint filed against them on November 25, 1996 (see CFTC News Release 3969-96, November 25, 1996).

Singer and Luger were principals and registered associated persons (APs) of Lexus, which was a registered introducing broker (IB). The CFTC order finds that Lexus, Singer, and Luger fraudulently solicited customers to trade options on commodity futures contracts in violation of the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, specifically section 4c(b) of the CEA and regulation 33.10. The order also finds that Lexus, Singer, and Luger failed to supervise diligently Lexus’s APs in violation of CFTC regulation 166.3.

The CFTC order finds that over the course of four years, Lexus solicited customers primarily through the broadcast of at least 56 thirty-minute radio infomercials. According to the order, Singer appeared in most of the Lexus infomercials, which aired throughout the United States. The order finds that when customers called in response to the infomercials, Lexus APs, including Singer and Luger, solicited them to buy options on futures contracts for the commodities advertised in the infomercials.

The CFTC Order Further Finds That Nearly 90 Percent Of Lexus’ Customers Lost Money, Resulting In Total Losses Of Approximately $6.8 Million

The CFTC order further finds that in both the infomercials and telephone solicitations, Lexus, Singer, and Luger fraudulently solicited customers by knowingly misrepresenting and omitting material facts. Specifically, the order finds that Lexus, Singer, and Luger overstated the ability to exploit seasonal and other existing and known supply and demand forces in the cash markets for various commodities to profit on options on futures contract on these commodities; downplayed the risk inherent in such options; and overstated customers’ performance records in trading them. The CFTC order finds that nearly 90 percent of Lexus’s customers lost money, resulting in total losses of approximately $6.8 million.

Lexus, Singer, and Luger have admitted the CFTC’s findings, and consented to the entry of the order that:

-- finds that they committed fraud in violation of section 4c(b) of the CEA and regulation 33.10, and failed to diligently supervise Lexus’s APs in violation of regulation 166.3;

-- directs them to cease and desist from further violations as charged;

-- revokes Lexus’s registration as an IB and the registrations of Singer and Luger as APs of Lexus;

-- prohibits them from trading on or subject to the rules of any contract market;

-- requires Singer and Luger to pay, jointly and severally, $6.8 million in restitution, plus prejudgment interest, pursuant to a five-year payment plan; and

-- requires them to comply with certain undertakings, including never applying for registration or claiming exemption from registration in any capacity and never engaging in any activity requiring such registration or exemption from registration.

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