Release:#3969-96 (CFTC Docket 97-4)
For Release: November 25, 1996
CFTC FILES ANTI-FRAUD ENFORCEMENT ACTION AGAINST LEXUS FINANCIAL GROUP, INC., DAVID ALAN LUGER, AND MARK LEE SINGER, ALL OF FLORIDA
CFTC Administrative Complaint Alleges Fraud in Soliciting Commodity Options Customers and Failure to Supervise Diligently
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) today announced the filing of a two-count administrative complaint alleging that Lexus Financial Group, Inc. (Lexus), a registered introducing broker of Hollywood, Florida; David Alan Luger of North Miami Beach, Florida, Lexus' co-owner and president; and Mark Lee Singer of Fort Lauderdale, Florida, its co-owner and vice president, violated the anti-fraud provisions of the Commodity Exchange Act and CFTC regulations by soliciting fraudulently customers to purchase commodity options. Lexus has been registered as an IB since December 1992, and Luger and Singer have been registered as Associated Persons of Lexus since November 1992.
CFTC Charges that Since 1992, Over 88 percent of Lexus' Customers Have Lost Money, While Lexus Received $5.3 Million in Commissions
Specifically, the CFTC complaint alleges that the respondents committed fraud by making false, deceptive, and misleading statements in radio infomercials and in telephone solicitations of customers to purchase commodity options, including fraudulent misrepresentations and omissions of material facts by: 1) virtually guaranteeing commodity price increases; 2) overstating the extent to which option customers would profit from these price increases; 3) exaggerating the likelihood of profit in trading commodity options; 4) minimizing the risk of loss involved in trading commodity options; and 5) overstating Lexus' performance record. The complaint further alleges that the respondents violated CFTC regulations by failing to supervise diligently the sales force employed by Lexus.
Since its inception in late 1992, Lexus has traded over 800 customer accounts -- over 88 percent of which have lost money, while Lexus has received $5.3 million in commissions, according to the complaint. Commissions received by Lexus represent more than 75 percent of total customer losses, the complaint further alleges.
A public hearing is to be held to determine whether the allegations are true and, if so, what sanctions, if any, should be imposed. Possible sanctions include revocation or suspension of the respondents' registrations; cease and desist orders; imposition of civil monetary penalties of up to $100,000 or triple the monetary gain to each respondent, whichever is greater, for each violation of the Commodity Exchange Act or CFTC regulations; trading prohibitions; and restitution to customers.