For Release: October 24, 2002
FLORIDA COURT FINDS TWO FLORIDA RESIDENTS AND THEIR FIRM COMMITTED COMMODITIES FRAUD
Defendants Matrix Trading Group, Inc., David Wedeen, and Christopher Smithers Are Ordered to Pay Restitution to Victims and Are Permanently Banned from All Commodity-Related Activity in CFTC Action
WASHINGTON, D.C. -- The Commodity Futures Trading Commission (CFTC) announced today that the Honorable William J. Zloch of the U.S. District Court for the Southern District of Florida issued a final order and judgment against Matrix Trading Group, Inc., David Wedeen, and Christopher Smithers of West Palm Beach Gardens, Florida. The court’s order arose out of a complaint filed by the CFTC on September 26, 2000, charging the defendants with commodities fraud (see CFTC New Release 4454-00, September 28, 2000).
The court, in its order entered on October 3, 2002, found that the defendants had committed fraud in the solicitation of customers. Specifically, the court found that Matrix employees routinely told customers that easily predictable price moves would result in large profits and that trading recommendations were a “sure thing.” The court further found that Matrix employees commonly told customers that Matrix had a success rate of 50 percent or better. The court found that, in reality, 92 percent of Matrix customers lost money totaling more than $3.2 million.
Based on these findings, the court held that Matrix, Wedeen, and Smithers committed fraud by making misleading statements in its telephone sales solicitations which: 1) exaggerated the likelihood of profiting from the purchase of commodity options; 2) failed to adequately disclose the risk inherent in the purchase of commodity options; and 3) misrepresented and overstated their performance record to customers.
The court found that Smithers committed similar violations at a firm where he was previously employed. In addition, the court found that Wedeen and Smithers were Matrix's principals and exercised day-to-day managerial authority. In such capacity, Wedeen and Smithers failed “to implement meaningful procedures for detecting fraud” and failed “to follow Matrix’s purported internal control procedures with regard to telephone solicitations,” permitting their employees to make misleading and deceiving statements to the public, according to the court.
The order prohibits:
The court order also permanently bars Smithers and Wedeen from trading commodity futures and options on futures on behalf of any other person or entity and orders the defendants to make full restitution to customers in the amount of $299,129.
A copy of the court’s order may be found at: www.cftc.gov.
The following CFTC Division of Enforcement staff are responsible for the case: Paul Hayeck, John Dunfee, and Kay Majors-Guy.
Media Case Contact
Paul Hayeck, Acting Associate Director
Division of Enforcement
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