CFTC News Release 4406-00 (No 2:98 Civ 00216J)
For Release June 12, 2000
UTAH FEDERAL COURT ENTERS PERMANENT INJUNCTION AGAINST JOHN LARRY SCHENK, SAM GRAY AND FIDELITY TRADERS GROUP IN CFTC ENFORCEMENT ACTION CHARGING FRAUDULENT OPERATION OF FOUR COMMODITY POOLS
Court Permanently Bars John Larry Schenk and Sam Gray From the Commodity Industry and Orders Restitution to Defrauded Investors
WASHINGTON — The Commodity Futures Trading Commission (CFTC) announced today that on May 22, 2000, U.S. District Court Judge Bruce Jenkins of the U.S. District Court for Utah entered a permanent injunction against John Larry Schenk of Salt Lake City, Sam Gray of West Valley City, and Fidelity Traders Group, Inc., in a case involving the fraudulent operation of four commodity pools. The court’s order stems from a six-count anti-fraud complaint filed by the CFTC on March 27, 1998 against Schenk, Gray, Fidelity Traders Group Inc. and five others (see CFTC News Release 4129-98, April 1, 1998).
The permanent injunction order entered by Judge Jenkins, among other things:
1) permanently enjoins the defendants from further violations of the Commodity Exchange Act and CFTC regulations, as charged;
2) prohibits the defendants from soliciting or accepting new clients or participants for commodity futures or options trading; and
3) prohibits the defendants from controlling or directing the trading for any commodity interest account for or on behalf of any other person.
In addition, the court ordered Schenk and Gray to pay the defrauded Wastach Fund pool participants $449,878.85 in restitution and pre-judgment interest. The court also ordered Schenk to disgorge $175,687, representing his profits from the conduct alleged in the CFTC’s complaint, and pay an additional $175,687 in civil monetary penalties. Finally, the court ordered Gray to disgorge $29,465, representing his profits, and pay an additional $29,465 in civil monetary penalties.
Over $850,000 Has Been Returned to Victims of this Fraudulent Scheme and a Related Scheme
This case was filed as the result of a joint investigation by the CFTC’s Division of Enforcement and the State of Utah, Division of Securities. As a result of this investigation, over $850,000 has been returned to victims of this fraudulent scheme and a related securities scheme.
The CFTC’s six-count complaint charged Schenk, Gray, and Fidelity Traders with fraudulently operating the Wasatch Fund, a commodity pool, between 1993 and 1998. As alleged in the CFTC complaint, Schenk and Gray misrepresented Schenk’s past trading record in soliciting pool participants, issued false statements and misappropriated customer funds. As further alleged, 16 investors gave Schenk and Gray approximately $402,000 in connection with the Wasatch Fund. Most of the defrauded investors resided in Idaho. The complaint also charged Schenk and three other defendants with fraudulently operating three additional commodity pools, Capital Advantage Group II, L.L.C., Brighton Fund, L.L.C., and Augusta Fund, L.L.C., issuing false statements and misappropriating customer funds. According to the CFTC’s complaint, 23 pool participants invested approximately $325,000 in these three pools. The investors in these pools resided in Utah.
In August 1999, The Honorable Bruce Jenkins entered consent orders of permanent injunction against Douglas Foster and Robert Moncur, two of the co-defendants (see CFTC News Release 4310-99, August 30, 1999). In April 2000, the court entered a consent order of permanent injunction against a third co-defendant, Brian Tobler (see CFTC News Release 4394-00, April 11, 2000).