FEDERAL COURT ORDERS ALABAMA RESIDENT RANDALL NELSON TO PAY OVER $800,000 TO SETTLE COMMODITY POOL FRAUD CHARGES
In Joint Federal/State Action, Court Orders Nelson to Repay a Total of $680,000 to Investors and to Pay Civil Penalties Totaling $125,000
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) and the Alabama Securities Commission announced today that on October 14, 2004, the United States District Court for the Northern District of Alabama issued a consent order of permanent injunction (order) imposing civil penalties, customer repayment obligations, and other sanctions against defendant Randall Nelson (Nelson), doing business as the Commodity Investment Club of Huntsville (Club).
The Order settles charges against Nelson alleging violations of the antifraud, registration, reporting and other provisions of the federal commodity laws and the Alabama securities laws in an action brought jointly by the CFTC and Alabama Securities Commission on September 23, 2004. The Order requires Nelson to make full repayment to all defrauded customers and to pay civil penalties amounting to $125,000. The Order also enjoins Nelson from further violations of the federal commodity laws and state securities laws, and permanently prohibits him from trading commodity futures contracts or securities. In consenting to the entry of the Order, Nelson admitted that all the allegations of the complaint were true and correct.
The complaint, filed on September 23, 2004, charged that from May 2000 through March 2003, Nelson acted as an unregistered commodity pool operator and engaged in a Ponzi scheme by stealing customer funds, making fraudulent sales solicitations and issuing false account statements. The Alabama Securities Commission and the CFTC joined as named plaintiffs, and charged Nelson with violation of the federal commodity laws and the Alabama antifraud and securities laws.
By presenting historical testing data as actual trading results and thus causing prospective pool participants to believe that the Club was generating trading profits, Nelson solicited at least 29 individuals residing in Alabama, Mississippi, Tennessee and Ohio to invest $680,000 in the Club for the purpose of trading commodity futures contracts. Contrary to Nelson’s representations that the Club was generating trading profits, the Club sustained substantial trading losses. In order to conceal the trading losses, Nelson provided pool participants with false written reports showing fictitious trading activity and trading profits, engaged in a “Ponzi” scheme by issuing checks from the Club’s bank account to various participants and falsely representing that the checks represented trading profits, made oral misrepresentations regarding non-existent commodity futures transactions, and issued or directed the issuance of partnership tax documents to pool participants that falsely represented profitable returns on investments in the Club.
Alabama Securities Commission Director, Joseph Borg, stated, “By combining our resources with the CFTC, we have multiplied the effectiveness of our resources against those who would swindle the hard earned money from our citizens.”
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Alabama Securities Commission