For Release: April 2, 1996
CFTC AND THE ARIZONA CORPORATION COMMISSION FILE CIVIL ANTI-FRAUD COMPLAINT AGAINST AYM FINANCIAL AND THREE INDIVIDUALS, ALLEGING THAT THE DEFENDANTS SOLD ILLEGAL, OFF-EXCHANGE FUTURES CONTRACTS
Order of Permanent Injunction Entered Against Three of the Defendants
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) today announced the filing of an anti-fraud complaint in the U.S. District Court for the Eastern District of Pennsylvania, with the Arizona Corporation Commission as co-plaintiff, against AYM Financial Corporation of Princeton, New Jersey, and three individuals: Thomas Paley of Warren, N.J.; Adam Juechter of Bridgewater, N.J; and Marc Kronish of Philadelphia, Pennsylvania.
None of the defendants has been registered with the CFTC in any capacity. AYM, a Delaware corporation, also maintained offices in Phoenix, Arizona and Houston, Texas. In addition to the Arizona Corporation Commission, the Pennsylvania Securities Commission in Philadelphia, and the Houston Division of the Texas State Securities Board provided substantial cooperative enforcement assistance to the Commission.
Simultaneous with the filing of the complaint, AYM and two of the individual defendants -- Paley, AYM's president and co-owner, and Juechter, AYM's executive vice president and co-owner -- entered consents to an order of permanent injunction and other equitable relief. The complaint is pending against defendant Kronish, an employee of AYM.
In their consents, AYM, Paley, and Juechter agreed to the entry of a permanent injunction prohibiting them from engaging in any business relating to the offer and sale of commodities, as defined in the Commodity Exchange Act (CEA), and requiring an asset freeze, an accounting, and repatriation of assets. In addition, the order provides for separate assessment by the court of disgorgement and restitution to customers of ill- gotten gains, as well as civil penalties, in amounts not to exceed $100,000, or triple the monetary gain to the defendants, for each violation of the CEA.
Finally, the owners and the firm, without admitting or denying the allegations of the complaint, have also agreed to be permanently enjoined from further violations of Federal and state laws charged in the complaint.
Defendants Allegedly Offered and Sold Illegal, Off-Exchange Futures Contacts to the General Public and Misrepresented the Likelihood of Profit and Risk to Customers, While Converting Customer Funds for Personal and Unrelated Business Expenses
The CFTC complaint, filed on April 1, 1996, alleges that the defendants, from at least March 1994, engaged in a scheme involving the offer and sale to the general public of illegal, off-exchange futures contacts, in violation of section 4(a) of the CEA, and cheated or defrauded customers. Among other things, the complaint alleges that the defendants:
bucketed customer orders, in violation of section 4b of the CEA;
deceived AYM's traders, customers, and potential customers about the nature of AYM's trading program and procedures, including the nature of the contracts traded, in violation of section 4b;
misrepresented the risks in the transactions and the likelihood of profits associated with such trading, in violation of 4b;
prepared and distributed false account statements to AYM's traders and customers, in violation of 4b;
operated as a futures commission merchant without being registered with the CFTC and commingled customer funds in violation of 4d; and
conversion of customer funds by using them to pay for personal and unrelated business expenses, in violation of 9(a).
In separate counts brought by the Arizona Corporation Commission, the defendants are charged with fraud and other violations of the Arizona Securities Act and the Arizona Investment Management Act, including offering and selling unregistered securities in the form of commodity investment contracts and operating as unregistered dealers and salesmen.
According to the complaint, the defendants used newspaper advertisements and mailings to solicit customers and to recruit persons to become "traders" at AYM. Many of the traders opened accounts for themselves or for other customers of AYM, who were generally close friends or family members, the complaint alleges. AYM required customers to deposit a minimum of $10,000 to open accounts and, according to the complaint, claimed that its returns were higher than any other markets, stating "returns of 10 percent per month are not unlikely. In fact, we seek a minimum yearly return of 30 percent, while you take only as much risk as you see fit." To further lure traders and customers, AYM provided false trading histories for Paley and Juechter and guidelines to its traders to use in responding to customer questions that misrepresented that customer funds were FDIC-insured, the complaint further alleges.
The three individual defendants, prior to formation of AYM, were affiliated with Korbean International Investment Corp, against which the CFTC obtained an order of permanent injunction on February 9, 1995 for fraud in connection with the unlawful offer of illegal, off exchange foreign currency futures contracts (see CFTC News Release 3817-95, February 9, 1995).
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