For Release:October 16, 1996
CFTC FILES CIVIL COMPLAINT AGAINST KENT ALLEN AHRENS OF YORK, PENNSYLVANIA, ALLEGING FRAUD UNDER THE COMMODITY EXCHANGE ACT
CFTC Also Has Pending Before the Court a Consent Order of Permanent Injunction Against Ahrens, to Enjoin Him from Violating Federal Commodity Law, to Bar Him from Registering with the CFTC, and to Order the Payment of $182,000 in Restitution
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced the filing on October 15, 1996, of a civil injunctive complaint in the U.S. District Court for the Middle District of Pennsylvania against Kent Ahrens of York, Pennsylvania, alleging fraud, recordkeeping and registration violations under the Commodity Exchange Act (CEA) and CFTC regulations. Ahrens is not registered with the CFTC in any capacity.
Specifically, the CFTC complaint charges Ahrens with committing fraud by engaging in futures and options transactions contrary to clients' authorization, and misrepresenting the profits and losses from his trading.
The CFTC complaint alleges that while Ahrens was employed by First Capital Strategists, of York, Pennsylvania, he traded an "index arbitrage strategy" for clients of the firm, principally, The Common Fund, a not-for-profit membership organization which manages investments of university endowment funds.
The complaint alleges that Ahrens's method of trading, including extensive "day trading" of futures, "increased the risks in the arbitrage program significantly." The Complaint also alleges that Ahrens, after experiencing a loss due to an unhedged position sometime in, or about, 1992 decided to attempt to recoup the loss by assuming a substantial, speculative position in S&P 500 futures contracts, or the equivalent in options or securities.
Losses Totalling $137 Million Accumulated by June 1995, the Complaint Alleges
The complaint further alleges that Ahrens thought the S&P Index would decline, and so he placed a directional bet for The Common Fund's account on the short side of the market. Over an approximately three-year period, according to the Complaint, Ahrens increased the size of his "short position" to the equivalent of more than 2,500 S&P futures contracts, which, as the S&P Index increased almost continuously, resulted in losses totalling about $137 million by June 1995.
The complaint states that Ahrens funded the short position through the sale of The Common Fund's securities. The complaint also alleges that Ahrens was able to conceal the loss largely because he was responsible for accounting for his trading results, and he thus reported to First Capital Strategists significant profits in the arbitrage strategy, which First Capital Strategists reported to The Common Fund in monthly statements.
Simultaneously with the filing of the CFTC's complaint, the CFTC has requested that the court enter a consent order of permanent injunction against Ahrens, which would permanently enjoin him from violating the CEA and CFTC regulations, as charged, and would prohibit Ahrens from ever seeking registration with the CFTC and order him to pay restitution in the amount of $182,000. This request is pending before the court.
U.S. Attorney's Office and the SEC Also File Charges Against Ahrens
In addition to the CFTC's action, the United States Attorney's Office for the Middle District (Harrisburg, Pennsylvania) filed criminal charges against Ahrens, and the Securities and Exchange Commission filed an injunctive action against Ahrens alleging violations of the securities laws.
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