CFTC News Release 4398-00 (99-Civ-967A JEC)
For Release May 15, 2000
U.S. DISTRICT COURT ORDERS FORMER ALPHARETTA, GEORGIA, MAN TO PAY $3.3 MILLION RESTITUTION AND PERMANENTLY BARS HIM AND HIS COMPANY FROM THE FUTURES INDUSTRY FOR FRAUDULENT COMMODITY POOL SCHEME
The CFTC Alleged that Donald E. James Pooled More than $5 Million from at Least 25 Investors throughout Georgia and Florida and Fraudulently Misappropriated Some of the Investors' Funds; In March 2000, James Was Sentenced to 51 Months in a Federal Prison
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced today that on May 8, 2000, U.S. District Court Judge Julie E. Carnes of the Northern District of Georgia, Atlanta Division, entered a consent order of permanent injunction against Donald E. James, formerly of Alpharetta, Georgia and Donald James, Inc., a Georgia corporation. The order requires James to pay $3,331,538 in restitution to victims, prohibits the defendants from engaging in activities in the futures industry on behalf of others and prohibits James from trading for himself until the restitution has been fully paid with interest, and permanently enjoins the defendants from violating federal commodity laws and regulations.
The order also permanently enjoins James and James, Inc. from soliciting funds, from controlling or directing the trading of commodity accounts on behalf of any other persons or entities and from seeking registration, or claiming exemption from registration, with the CFTC.
Under the terms of the court's order, defrauded investors are deemed to be third-party beneficiaries of the order, such that at any time after the Equity Receiver in the case has been discharged, and in any event no later than five years after date of the Order, each investor may seek enforcement of the order.
In consenting to the entry of a permanent injunction, the defendants neither admitted nor denied the allegations in the eight-count civil injunctive complaint, which was filed by the CFTC on April 15, 1999 (see CFTC News Release 4257-99, April 21, 1999). The CFTC's complaint alleged that from November 1994 until April 1999, James accepted and pooled more than $5 million from at least 25 investors throughout Georgia and Florida and fraudulently misappropriated some of the investors' funds.
Specifically, the complaint alleged that James and his firm misrepresented to investors that all of their funds would be used to trade commodity futures when, in fact, James used less than $200,000 of investor's funds to actually trade futures. The complaint alleged that James violated the anti-fraud provisions of sections 4b and 4o(1) of the Commodity Exchange Act (CEA) by misrepresenting to investors, both orally and in written statements, that they were earning profits from futures when, in fact, James actually lost money trading. The complaint also alleged that James and James, Inc. used some investors' funds to make returns of principal and purported profits to some of the other investors, in a manner akin to a Ponzi scheme.
Finally, the complaint alleged that James and James, Inc. illegally acted as commodity pool operators and commodity trading advisors without being registered with the CFTC and that James illegally commingled investors' funds with his own.
In March 2000, James Was Sentenced to 51 Months in a Federal Prison
In January 2000, in a related criminal action brought by the United States Attorney for the Northern District of Georgia with the CFTC's cooperation, James pled guilty to one count of mail fraud. In March 2000, James was sentenced to 51 months in a federal prison and he is currently serving that sentence. Additional criminal charges brought by Fulton County, Georgia prosecutors are still pending against James.
# # #