U.S. COMMODITY FUTURES TRADING COMMISSION CHARGES TWO GEORGIA CORPORATIONS AND FIVE OTHERS IN $4.6 MILLION COMMODITY OPTIONS FRAUD SCHEME
CFTC Complaint Names American Derivatives Corp., Brokerage Management Corp., Layne David Gerstel, Devereux Decatur Booth, and David N. Mittler as Participants In Alleged Fraudulent Solicitations Of More Than 274 Customers
Futures Commission Merchants National Commodities Corp., Inc. and International Commodity Clearing, LLP Also Charged
WASHINGTON, D.C.—The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a two-count complaint in the United States District Court for the Northern District of Georgia, charging American Derivatives Corp., a Georgia corporation, with fraudulently inducing customers to purchase options on commodity futures contracts (option contracts) and failing to supervise employees committing such fraud, in violation of the Commodity Exchange Act (CEA) and CFTC regulations. Also charged with fraud are Brokerage Management Corp. (Brokerage Management), the firm’s management company based in Atlanta, and American Derivatives’ employees Layne David Gerstel and Devereux Decatur Booth, both of Atlanta, and David N. Mittler of Aventura, Florida.
The complaint further charges guaranteeing futures commission merchants National Commodities Corp., Inc. (NCCI) and International Commodity Clearing, LLP (ICC) with liability for American Derivatives’ alleged violations. The court has issued a restraining order against all defendants -- except NCCI and ICC -- freezing assets and ordering the preservation of books and records.
The complaint alleges that starting in January 2004, American Derivatives, Brokerage Management, Mittler, Gerstel, and Booth engaged in a fraudulent scheme to solicit customers to trade commodity option contracts by making fraudulent misrepresentations and omissions of material facts, such as claims that: customers would double or triple their investments; seasonal trends, or known or expected events such as the war in Iraq, would cause predictable movements in the markets and that would enable customers to achieve high profits; and, there is little or no risk in trading option contracts through American Derivatives.
The complaint also alleges that American Derivatives, through its brokers, failed to advise customers, in light of the profit representations they made, that 97% of the firm’s customers lost money trading with American Derivatives.
According to the complaint, American Derivatives had guarantee agreements with NCCI, and later ICC, both futures commission merchants, and that NCCI and ICC, by reason of those guarantees, are liable for the wrongdoing alleged. The complaint also charges that defendant Brokerage Management actively manages American Derivatives’ finances, and therefore contributes to the success of the fraudulent scheme.
The CFTC complaint seeks a return of funds to injured customers, disgorgement of ill-gotten gains, the imposition of monetary penalties, and an order of a permanent injunction enjoining defendants from further commodity-related activity.
The following CFTC Division of Enforcement staff members are responsible for this case: Elizabeth Padgett, Jan M. Folena, Lacey Dingman, Richard Glaser, and Richard Wagner.
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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.
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