For Release: February 5, 2003
TEXAS RESIDENT CHARGED WITH SWINDLING MILLIONS FROM INVESTORS AND SPENDING MONEY ON GAMBLING, JEWELRY, AND AUTOMOBILES
CFTC Charges John A. Wheeler and His Companies with Fraudulent Solicitation and Misappropriation in Connection with Purported Foreign Currency Trading; Court Enters Preliminary Injunction Against Defendants, Freezing Their Assets, Among other Sanctions
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of an enforcement action in federal court in Texas against defendants John A. Wheeler, of Nacogdoches, Texas, and two limited liability companies he operated, Long Point Investments, LLC and CDM Technologies, LLC.
The CFTC complaint, filed on January 30, 2003, charges the defendants with fraudulently soliciting at least $35 million from at least 810 investors for the purpose of trading foreign currency futures contracts and with misappropriating at least $8.4 million of those funds. The CFTC alleges that Wheeler used the money for personal and luxury expenditures.
The complaint also names as relief defendants several persons who allegedly received investor funds, although none is charged with wrongdoing, including Walter S. Cole, of Liberty, Texas, Marc Donatelli, of Arlington, Texas, and non-Texas residents Michael Fagan, Robert Mendoza, and Gary Wood.
Federal Court Orders Asset Freeze
Also, on February 3, 2003, the Honorable John Hannah, Jr., of the U.S. District Court for the Eastern District of Texas, Tyler Division, entered a consent order of preliminary injunction against Wheeler and his companies, freezing assets, preventing the destruction or alteration of books and records, granting the CFTC staff immediate access to those records, and enjoining the violation of provisions of the Commodity Exchange Act and CFTC regulations with which the Defendants are charged in the complaint.
According to the complaint, from at least November 2000 through May 2002, Wheeler and his two limited liability companies, Long Point Investments and CDM Technologies, fraudulently solicited, accepted and pooled at least $35 million from at least 810 investors purportedly to trade foreign currencies, among other alleged high-yield investment schemes. The complaint alleges that Wheeler lost some of the investment funds trading foreign currency futures, but diverted most of the funds for other purposes. Specifically, the complaint states that Wheeler used monies received from “new” investors to repay “earlier” investors, in a manner akin to a Ponzi scheme and that he spent at least $8.4 million – and perhaps as much as $18 million – of investors’ money for personal and luxury expenditures. The CFTC alleges that the relief defendants were paid fees for helping Wheeler find investors.
In its 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 of not more than the higher of $110,000 for each violation or triple the monetary gain to Wheeler, among other remedial relief. The CFTC is seeking disgorgement of approximately $1.8 million in ill-gotten commissions that Wheeler paid the Relief Defendants for referring investors.
This matter is part of a cooperative enforcement effort with the United States Attorney’s Office for the Eastern District of Texas, Lufkin Division, which provided invaluable assistance to the CFTC in its investigation of this case. The United States Attorney’s Office charged Wheeler by Information with one count of wire fraud on October 15, 2002, and froze approximately $3 million for distribution to investors. United States v. John Allen Wheeler, Criminal No. 9:02-CR-34, Eastern District of Texas, Lufkin Division. The criminal case remains pending at this time.
“This is a perfect example of how federal agencies can work together to prosecute those that commit fraud,” said Gregory Mocek, the CFTC’s Director of Enforcement.
The following CFTC Division of Enforcement staff are responsible for this case: Rosemary Hollinger, Scott R. Williamson, Diane M. Romaniuk, Ava M. Gould, William Janulis, Frank Ferrara, and Thomas Koprowski.
A copy of the CFTC complaint and consent order may be obtained at www.cftc.gov.
Media Enforcement Contact:
Rosemary Hollinger, Associate Director/Regional Counsel
CFTC Division of Enforcement
# # #