For Release: July 24, 2002
GRENADIAN COMPANY, A CANADIAN CITIZEN, AND TWO MINNESOTA RESIDENTS CHARGED WITH COMMODITY POOL FRAUD
CFTC Alleges that Sovereign Resource Management, Inc., Ken Mitra, Virgil E. Smith, and Anthony J. Heppner Fraudulently Solicited Individuals to Trade Foreign Currency Futures Contracts and Misappropriated Over $600,000 of Investors’ Funds
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a six-count injunctive complaint against Sovereign Resource Management, Inc., a Grenadian corporation, Ken Mitra, a Canadian citizen and president of Sovereign, Virgil E. Smith of Howard Lake, Minnesota, and Anthony J. Heppner of Theilman, Minnesota. The CFTC charges that the defendants fraudulently solicited individuals to trade foreign currency (FOREX) futures contracts on their behalf and misappropriated over $600,000 of investors’ funds.
On July 19, 2002, the Honorable Ann D. Montgomery of the U.S. District Court for the District of Minnesota entered a statutory restraining order prohibiting the defendants from destroying any of their records and from refusing representatives of the CFTC immediate access to such records. A hearing on the CFTC’s motion for a preliminary injunction has been set for July 31 before the Honorable Michael J. Davis.
Defendants allegedly Accepted About $1.7 Million From at Least 97 Customers
Specifically, the CFTC complaint, filed on July 18, 2002, alleges that, from at least November 1997 to January 2001, the defendants -- Sovereign, Mitra, Smith, and Heppner -- accepted approximately $1.7 million in funds from at least 97 pool participants to trade foreign currency futures contracts on behalf of the investors. According to the complaint, defendants misappropriated approximately $630,000 of those funds for their own use.
The complaint also alleges that in soliciting investors, defendants falsely represented the profitability of the pool. For instance, according to the complaint, Heppner claimed that participants’ projected profits were 52 percent a month, Mitra told participants that the value of the pool accounts had doubled in a single month of trading, and Smith represented that the Sovereign trader was achieving a 50:1 profit ratio for the fund and that one group of participants had already received $1 million as a result of their Sovereign investment. The complaint also alleges Sovereign and Smith issued statements to participants that falsely reported trading profits, concealed losses and misrepresented the value of each participant’s interest in the pool.
The CFTC complaint also charges defendants with registration violations and Sovereign with having failed to provide required pool disclosure documents to prospective pool participants.
In its continuing litigation against the defendants, the CFTC is seeking preliminary and permanent injunctive relief, an accounting, restitution to investors, disgorgement of ill-gotten gains, and civil monetary penalties of not more than the higher of $120,000 or triple the monetary gain to the defendants, among other remedial relief.
The following Division of Enforcement staff are responsible for the case: Scott R. Williamson, William P. Janulis, Susan B. Padove, and Thomas J. Koprowski.
Media Enforcement Contact:
Scott R. Williamson
Deputy Regional Counsel
Division of Enforcement
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