LOS ANGELES FEDERAL COURT ISSUES PRELIMINARY ORDER ENJOINING CHASE COMMODITIES CORPORATION AND TWO EMPLOYEES FROM VIOLATING THE COMMODITY EXCHANGE ACT
WASHINGTON, D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Percy Anderson of the United States District Court for the Central District of California has entered an order of preliminary injunction against Chase Commodities Corporation (Chase), Lee La Gorio, both of Woodland Hills, California, and Excel Obando of Sun Valley, California, enjoining them from violating certain anti-fraud sections of the Commodity Exchange Act and the CFTC's regulations. The order also continued the asset freeze the court had previously ordered as to all defendants.
The court's order stems from a complaint filed on August 4, 2004 (see CFTC News Release 4973-04), and follows a statutory restraining order entered by the court on August 5, 2004.
The complaint charged that defendants and other Chase salespersons told customers that large profits would be made, such as doubling the customer's money within short periods of time. Among other charges, the complaint alleged that defendants and others falsely represented to customers that the risks of loss from trading commodity options were minimal, while failing to disclose that from August 2003 to March 2004, approximately 99 percent of the firm's 359 actively trading customers lost money trading commodity options -- for a total loss of more than $4 million -- during which time Chase charged more than $2 million for commissions and fees.
The court's order, issued after a hearing, found that the CFTC had made a strong showing that Chase's salespersons misrepresented the return and stability of options and that the CFTC is likely to prevail on the merits. The court further found an "unavoidable inference" that La Gorio, Chase's President and Treasurer, and Obando, Chase's Chief Compliance Officer, either "were, or should have been, aware of" the sales tactics employed by Chase's small sales staff or, if they lacked actual knowledge of the salespersons' tactics, did so only through "conscious avoidance."
In its continuing litigation against defendants, the CFTC is seeking permanent injunctive relief, return of funds to defrauded customers, repayment of ill-gotten gains, and an award of civil monetary penalties.
The following CFTC staff members are responsible for this case: Ken McCracken, Sandy McCarthy, Thomas Bloom, and Richard Glaser.
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