Release #4412-00 (CFTC Docket No: 00-24)
For Release: June 30, 2000

CFTC FILES AND SETTLES ENFORCEMENT ACTION AGAINST SEUNGHO KIM, JOHN KI PARK, AND HOUSTON SYSTEM TRADING, LLC IN CASE INVOLVING THE FRAUDULENT SOLICITATION OF CUSTOMERS AND POOL PARTICIPANTS

WASHINGTON The Commodity Futures Trading Commission (CFTC) announced today the issuance of an order instituting administrative proceedings against, and simultaneously accepting an offer of settlement from, Seungho Kim, John Ki Park, and Houston System Trading, LLC (HST), all of Houston, Texas.

The CFTC order finds that Kim and HST -- aided and abetted by Park -- fraudulently solicited prospective pool participants and prospective clients to open managed accounts to trade commodity futures contracts. Kim, HST, and Park consented to the entry of the order without admitting or denying the findings made in the order.

Specifically, the order finds that Kim and HST, neither of whom is registered with the CFTC, fraudulently solicited customers to invest in three commodity pools and open individual managed accounts to trade commodity futures contracts by making fraudulent guarantees against losses, misrepresenting their trading track record, and fraudulently presenting hypothetical trading results as actual trading results. The order finds that Park, who was a registered associated person (AP) of an introducing broker (IB) at that time, knew that Kim and HST were making misrepresentations and guarantees of limited losses, but despite that knowledge, continued to receive commissions generated by those customer accounts. By such conduct, the order finds that Park aided and abetted Kim's and HST's fraud.

The CFTC order finds that Kim and HST violated antifraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, specifically sections 4b(a)(i) and (iii) and 4o(1) of the CEA and section 4.41(a) and (b) of the regulations. The order also finds that Park aided and abetted Kim's and HST's fraudulent solicitation of customers to trade commodity futures contracts and thus is liable for their fraud, under section 13(a) of the CEA.

The CFTC order also finds that HST failed to register, as required, as a commodity pool operator (CPO) and as a commodity trading advisor (CTA), in violation of section 4m(1) of the CEA, and that Kim failed to register, as required, as an AP of a CPO and CTA in violation of section 4k of the CEA and section 3.12 of the CFTC's regulations. HST and Kim also mishandled funds, failed to provide required documents and reports, and failed to keep required books and records, in violation of sections 4.20, 4.21, 4.22, 4.23, 4.31 and 4.33 of the regulations, according to the order.

The CFTC order:

  1. directs them to cease and desist from further violations of the CEA and CFTC regulations;

  2. orders Kim and HST to pay $86,498 restitution and a civil monetary penalty of up to $50,000, pursuant to a 10-year payment plan;

  3. orders Park to pay restitution in the amount of up to $35,000 and a civil monetary penalty of up to $35,000, pursuant to a 10-year payment plan;

  4. prohibits Kim and HST from applying for registration or seeking exemption from registration with the CFTC in any capacity, and engaging in any activity requiring such registration or exemption from registration, or acting as a principal, agent or officer of any person registered, exempted from registration or required to be registered with the CFTC;

  5. prohibits Park from applying for registration or seeking exemption from registration with the CFTC in any capacity, and engaging in any activity requiring such registration or exemption from registration, or acting as a principal, agent or officer of any person registered, exempted from registration or required to be registered with the CFTC for a period of six months;

  6. prohibits Park, for a period of five years, from acting as a principal, partner, officer, or branch office manager of any entity registered or required to be registered with the CFTC; and directly or indirectly acting in any supervisory capacity over anyone registered or required to be registered;

  7. prohibits Kim and HST from trading any commodity futures contracts or options on commodity futures contracts on any contract market; and

  8. prohibits Park from trading any commodity futures contracts or options on commodity futures contracts on any contract market for a period of six months.