For Release: April 12, 2001
CFTC CHARGES JEFFREY T. BAILEY OF AMELIA, OHIO, AND JMK CAPITAL MANAGEMENT, INC. WITH COMMODITY POOL FRAUD
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on April 12 , 2001, it filed a six-count injunctive complaint charging Jeffrey T. Bailey of Amelia, Ohio, and JMK Capital Management, Inc. (JMK Capital), an Ohio corporation, with fraudulently operating a commodity pool and with registration violations. The case is set before the Honorable Sandra S. Beckwith of the U.S. District Court for the Southern District of Ohio, Western Division.
The CFTC complaint specifically alleges that, commencing in late 1994 or early 1995, Bailey solicited, accepted and pooled at least $624,000 from approximately 50 members of the general public (investors) for the purported purpose of trading commodity futures. The complaint alleges that, among other things, Bailey misappropriated funds received from investors and used them for personal expenses, misrepresented his past trading success to potential investors and issued false monthly commodity statements to investors -- all in violation of sections 4b(a)(i), (ii) and (iii) and 4o(1) of the Commodity Exchange Act (CEA). In particular, the complaint alleges that Bailey concealed from investors that only a small amount of investor funds were actually being traded, that such trading had resulted primarily in losses, and that he was diverting funds for his personal use and benefit. The complaint further alleges that Bailey concealed his trading losses by using funds from current investors to pay earlier investors, in a manner akin to a Ponzi scheme.
The complaint also alleges, among other things that, Bailey and JMK Capital failed to register with the CFTC as commodity pool operators, in violation of section 4m(1) of the CEA, and that since Bailey was acting as the agent JMK Capital, JMK Capital is liable for his actions or omissions. JMK Capital formerly was registered with the CFTC as an introducing broker and commodity trading advisor. Bailey formerly was registered with the CFTC as an associated person of JMK Capital. Neither is currently registered in any capacity.
CFTC Files Proposed Consent Order Seeking Preliminary Injunctive Relief
The CFTC also filed a proposed order of preliminary injunction, consented to by the defendants, which, if entered by the Judge, would freeze defendants' assets, prevent the destruction or alteration of books and records, and prohibit further violations of the antifraud and other provisions of the CEA and CFTC regulations. In the continuing litigation against the defendants, the CFTC is seeking permanent injunctive relief, an accounting, restitution to customers, disgorgement of ill-gotten gains and civil monetary penalties.
The United States Attorney for the Southern District of Ohio also filed today a criminal information against Bailey arising out of the same facts and charging criminal violations of the CEA. The CFTC received valuable assistance from the United States Attorney’s Office and the Federal Bureau of Investigation in its investigation of this matter.