CFTC News Release 4529-01
For Release June 21, 2001
MAINE RESIDENT CHARGED WITH DEFRAUDING OVER 2OO INVESTORS
CFTC Alleges that Edward W. Knipping and Time Traders, Inc. Fraudulently Operated a $5.9 Million Commodity Pool and Misappropriated Investor Funds
WASHINGTON---The United States Commodity Futures Trading Commission (CFTC) announced that the U.S. District Court for the District of Maine today unsealed a three-count injunctive complaint that the CFTC filed on June 20, 2001 against Edward W. Knipping of Boothbay Harbor, Maine and Time Traders, Inc. (Time Traders), a Maine corporation. The complaint charges Knipping and Time Traders with fraudulently operating a commodity pool that collected at least $5.9 million from approximately 250 investors.
Simultaneously, the U. S. Attorney for the District of Maine, Paula D. Silsby, announced that the U. S. Attorney's Office has unsealed a Criminal Complaint against Knipping, Time Traders and another business, charging them with fraud, following Knipping's arrest in Texas.
Specifically, the CFTC complaint alleges that, since at least March 2000 and continuing through May 2001, Knipping solicited and pooled at least $5.9 million from approximately 250 investors for the purported purpose of trading commodity futures. The complaint alleges that, among other things, Knipping misappropriated investor funds.
As alleged by the CFTC, “Knipping organized his commodity pool investors in a pyramid-like fashion, referring to his organizational layers as ‘groups.’ Each group consisted of around 15 investors, including 12 passive investors, one ‘coordinator,’ one ‘manager,’ and one ‘recruiter.’ A coordinator was an investor who had recruited 12 other investors and had certain responsibilities for obtaining performance information from Knipping and disseminating it to other group members. A manager was an investor who had recruited at least 3 new people.” The complaint further alleges that under this pyramid-like structure, a recruiter was an investor responsible for contacting other prospective investors. The complaint goes on to allege that “according to statements made by Knipping and additional information contained in a Time Traders solicitation brochure, the coordinator, manager, and recruiter were to be paid 15%, 10% and 5% respectively, of the profits of the group of investors they recruited.” The complaint alleges that although Knipping indeed paid his coordinators, managers, and recruiters an aggregate of $800,000 in fees, commissions and other payments -- purportedly based on trading profits -- those payments occurred during a period when his trading account sustained net losses, not profits.
The complaint also alleges that rather than report losses to the investors, the defendants issued false monthly account statements, indicating that the pool was highly profitable.
The CFTC is seeking preliminary and permanent injunctive relief, an accounting, restitution to customers, disgorgement of ill-gotten gains, and civil monetary penalties of not more than the higher of $110,000 for each violation ($120,000 for violations on or after October 23, 2000) or triple the monetary gain to defendants, among other remedial relief.
The CFTC appreciates the assistance of the U. S. Attorney's Office for the District of Maine, the FBI and the U.S. Securities and Exchange Commission in this matter.
Copies of the CFTC complaint are available at http://www.cftc.gov/
CFTC Division of Enforcement
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