HAWAIIAN RESIDENT BARRY SCHOTZ ORDERED TO PAY $4.5 MILLION IN SETTLEMENT OF U.S. COMMODITY FUTURES TRADING COMMISSION FRAUD ACTION
Court Also Enjoins Los Angeles-Area Resident Randolph Gale in Same Commodity Pool Fraud Scheme
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 issued consent orders settling
the CFTC’s charges in a commodity pool fraud case brought
against Barry Schotz of Kilauea, Hawaii, and Randolph
Gale of Hidden Hills, California.
In the Schotz consent order, the court found that Schotz fraudulently solicited and accepted approximately $5 million for the Bear pool from at least 51 pool participants, most of whom resided in and around Los Angeles County, California. The court further found that Schotz’s futures trading with the Bear pool’s funds consistently lost money, while Schotz falsely reported to pool participants that his trading was highly profitable and that the Bear pool was making money. The order also finds that Schotz commingled customer funds with his personal funds, misappropriated approximately $1.7 million of customer funds that he used for personal expenses, and failed to provide pool disclosure documents to pool participants.
The court ordered Schotz to make restitution to customers in the amount of $2.9 million, pay a civil monetary penalty of $1.6 million, and enjoined him from engaging in commodity pool fraud and from violating other provisions of the Commodity Exchange Act and CFTC regulations. Schotz consented to the entry of the court’s order without admitting or denying the allegations of the complaint or the principal findings in the consent order.
In the Gale consent order, the court found that Gale, who deposited his own funds into the Bear pool, solicited 34 of the pool’s participants without being registered with the CFTC, raised an alert with compliance personnel at the brokerage firm holding the pool’s account after Schotz confessed his trading losses, caused Schotz to return money to the 34 pool participants Gale had solicited, and then made up the balance of those participants’ losses from his own funds. The court enjoined Gale from engaging in activities relating to pool solicitation, from trading futures for others, and from seeking future registration with the CFTC.
Gale consented to the entry of the court’s order without admitting or denying the allegations of the complaint.
Schotz Pleaded Guilty to Criminal Fraud Violations Based on Pool Fraud
Schotz, who was previously convicted of fraud in 1994 and served
five years in federal prison, recently pleaded guilty in the
United States District Court for the Northern District of
Illinois to charges of wire fraud arising out of the allegations
in the CFTC complaint. He has been released on bond while he
awaits sentencing before Judge Charles Norgle in Chicago.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious internet websites.
You may contact the CFTC at 1-866-FON-CFTC (1-866-366-2382) visit us at our Customer Protection web page: (www.cftc.gov/cftc/cftccustomer.htm), or fill out our Internet Report Form identifying your concerns (www.cftc.gov/enf/enfform.htm).
In addition, the CFTC publishes a series of Consumer Advisories at http://www.cftc.gov/cftc/cftccustomer.htm#advisory alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.