U.S. COMMODITY FUTURES TRADING COMMISSION CHARGES COMMERCIAL HEDGE SERVICES, PRIME TRADING COMPANY, AND LAWRENCE JOSEPH VOLF WITH FRAUD
Introducing Broker and his Company Allegedly Made Unauthorized, Speculative Trades in Commodity Hedge Accounts that Caused Farmers $5 Million in Losses
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of an enforcement action on May 4, 2004, in the United States District Court for the District of Nebraska against two Nebraska companies, Commercial Hedge Services of North Platte, Nebraska and Prime Trading Company of Loup City, Nebraska, and their principal, Lawrence Joseph Volf (Volf) of North Platte, Nebraska. The CFTC complaint charges that Volf and his companies managed the commodity trading accounts of nearly 100 Nebraska farmers and, in that capacity, both committed fraud and engaged in unauthorized trading.
Specifically, the complaint alleges that defendants were engaged to manage hedge accounts for the farmers. As further alleged, without approval from the farmers, and rather than following the explicit instructions in the farmers' hedge account agreements, defendants executed a speculative trading strategy that resulted in approximately $5.1 million in trading losses for those farmers. According to the complaint, defendants consistently led the farmers to believe that defendants' trading strategy would reduce the farmers' trading risks when, in fact, the trading strategy substantially increased the farmers' risks and their ultimate exposure to adverse price fluctuations.
Court Orders Preliminary Injunction
Also on May 4, 2004, the district court entered an order of preliminary injunction prohibiting the defendants from violating provisions of the Commodity Exchange Act and requiring them to provide written disclosures to the farmers regarding their trading strategy. The defendants consented to the order without admitting or denying the allegations of the complaint. In the ongoing litigation, the CFTC seeks full repayment to the farmers, repayment of ill-gotten gains, monetary penalties, a permanent injunction, and other remedial relief.
The National Futures Association's Business Conduct Committee has also filed a complaint against Commercial Hedge Services and Lawrence Joseph Volf, alleging unauthorized trading. Under NFA rules, the Committee may expel or suspend the defendants from NFA membership and issue fines of up to $250,000 for each violation, among other actions. NFA is a self-regulatory organization for the commodity futures industry.
The CFTC Division of Enforcement staff responsible for this case are: Matthew Elkan, Frank Rangoussis, Jan Folena, and Richard Glaser.
# # #