U.S. COMMODITY FUTURES TRADING COMMISSION CHARGES EQUITY FINANCIAL GROUP LLC AND OTHERS WITH FRAUDULENTLY SOLICITING MORE THAN $5.7 MILLION FROM INVESTORS IN THE SHASTA CAPITAL ASSOCIATES, LLC HEDGE FUND
Shasta Recently Hailed as "Hedge Fund of the Week"
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of an enforcement action in the United States District Court for the District of New Jersey against Equity Financial Group LLC (Equity), a New Jersey company, and its President, Vincent Firth, of Medford, New Jersey, alleging fraud in the solicitation of commodity pool participation interests in Shasta Capital Associates, LLC (Shasta), a Delaware corporation.
The CFTC's complaint also charges the trading advisor that traded Shasta’s funds in the futures markets, Tech Traders, Inc., a Delaware corporation located in Gastonia, North Carolina, and Robert W. Shimer, of Leesport, Pennsylvania, the legal counsel for Equity and Shasta, with regulatory violations. (CFTC v. Equity Financial Group LLC; Tech Traders, Inc.; Vincent Firth and Robert W. Shimer, Civil Action No. 04-1512.)
The CFTC complaint, filed on April 1, 2004, alleges that Equity and Firth fraudulently solicited and received at least $5.7 million from 29 or more investors for participation interests in Shasta, a commodity pool that has been touted as a hedge fund.
According to the allegations of the complaint, Equity and Firth, through a website and a private placement memorandum, touted Shasta as having earned annual investment returns exceeding 100 percent in each of the last three years by trading commodity futures contracts using a “unique computerized approach" they called the Synergetic Portfolio Trading System. As alleged in the complaint, as recently as two weeks ago, a third-party web site featured Shasta as the “Hedge Fund of the Week.”
According to the complaint, funds invested in Shasta were transferred to Tech Traders, which traded the funds in its own name and is alleged to have lost more than $3.5 million during the past 12 months. The CFTC complaint, therefore, alleges that Shasta did not achieve the “astonishing” 131.97 percent return for the period March 2003 to February 2004, as claimed by Equity and Firth.
The complaint does not charge Tech Traders with fraud, but alleges that it illegally traded customer funds in its own name. Among other charges, the complaint alleges that Equity and Firth failed to register with the CFTC. It also alleges that Shimer, the attorney for Equity and Shasta, aided and abetted Equity’s failure to register and Tech Traders’ trading of funds in its own name.
Federal Court Freezes Assets, Bars Destruction of Books and Records, and Appoints a Receiver
On April 1, 2004, U.S. District Court Judge Robert B. Kugler entered a statutory restraining order against the defendants, freezing their assets and preventing the destruction or alteration of their books and records. Judge Kugler also appointed a receiver with powers to, among other things, take immediate possession, custody, and control of certain assets and property and the books and records of the defendants and take all steps necessary to secure and protect the assets and property of the pool.
In its continuing litigation against defendants, the CFTC is seeking preliminary and permanent injunctive relief, refunds to customers, repayment of ill-gotten gains, and monetary penalties. Judge Kugler has scheduled a status hearing on April 7, 2004, at 2:00 p.m.
The following CFTC Division of Enforcement staff are responsible for this case: Elizabeth M. Streit, Joy H. McCormack, Jennifer S. Diamond, Venice Bickham, Cynthia Cannon, Anne Smith, Scott R. Williamson, and Rosemary Hollinger.
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