CALIFORNIA RESIDENTS PAULINO RENE DIAS, JR. AND VICTOR SMITH, ALONG WITH KRUTE CORPORATION, AGREE TO PAY $2.19 MILLION TO SETTLE COMMODITY POOL FRAUD ACTION
U.S. Commodity Futures Trading Commission Imposes Total Civil Penalties of $240,000 and Orders Customer Restitution of $1,950,000
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today that the United States District Court for the Central District of California has issued a consent order of permanent injunction against Paulino Rene Dias, Jr., Victor Smith, and Krute Corporation (Krute), finding that the defendants violated the antifraud provisions of the Commodity Exchange Act (CEA) relating to the trading of commodity futures and options by a commodity pool operator. The order stems from a complaint filed against the defendants on April 16, 2003 (see CFTC News Release 4777-03, April 21, 2003).
The consent order, issued on December 12, 2004, finds that, during the course of the pool’s operation between November 2001 and August 2002, Dias and Smith, together with Krute, improperly directed a portion of the pool’s funds to pay business expenses, such as employee salaries and rent, as well as personal expenses, including rent and cash withdrawals, all in violation of their agreement with pool participants. Additionally, the order finds that Krute violated the CEA by operating as a commodity pool operator without being registered as such.
The order further finds that since Dias controlled Krute, and did not act in good faith or knowingly induced the acts constituting Krute’s violations of the CEA, Dias is liable for Krute’s violations. In entering into the consent order, the defendants neither admitted nor denied the allegations contained in the complaint or findings contained in the consent order.
The order requires the defendants to pay restitution to Krute’s customers totaling $1,950,000, to jointly and severally pay a $240,000 civil monetary penalty, with Dias personally liable for $43,800, and further imposes on defendants a lifetime ban preventing them from trading commodity futures or options, and from controlling or directing any commodities accounts or applying for registration. The order further permanently enjoins them from violating antifraud provisions of the CEA.
The following CFTC Division of Enforcement staff were responsible for this action: Jason Gizzarelli, Karen Kenmotsu, and Gretchen Lowe.
# # #