For Release:February 26, 1996
COLORADO COURT ISSUES EX PARTE ASSET FREEZE ORDER IN CFTC ANTI- FRAUD ACTION AGAINST PRISM FINANCIAL AND BRIAN PRENDERGAST, BOTH OF COLORADO, AND TWO OTHER DEFENDANTS IN CALIFORNIA
Order Stems from a CFTC Civil Action Charging the Defendants with Cheating and Defrauding Commodity Pool Customers, and Misappropriating Customer Funds
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that the Honorable Wiley Daniel of the U.S. District Court for the District of Colorado in Denver entered an ex parte asset freeze order against Prism Financial Corporation, a registered commodity pool operator and commodity trading advisory; Brian Prendergast, president and a principal of Prism, both of Englewood, Colorado; Joel DeAngelis, a principal of Prism who resides in Los Gatos, California; and Amerinational Financial, a Prism sales agent in Beverly Hills, California. Neither DeAngelis nor Amerinational Financial is registered with the CFTC in any capacity. In addition to freezing the defendants' assets, the court order also prohibits the defendants from destroying books and records and from denying CFTC representatives access to such records.
The court's action stems from a six-count civil injunctive complaint, filed on February 20, 1996, charging, among other things, that the defendants violated the anti-fraud provisions of the Commodity Exchange Act and CFTC regulations.
The Defendants Collected at Least $1,000,000 from at least 34 Customers
The defendants allegedly committed fraud by, among other things, cheating and defrauding at least 34 customers and potential customers by making false, deceptive, or misleading representations in soliciting investors to invest in the Prism Limited Liability Company (Prism LLC) commodity pool created by Prism. The complaint charges that the defendants omitted material facts concerning the likelihood of profit and the risk of loss -- including falsely guaranteeing that customers would not lose their principal associated with investments in the pool. In addition, the complaint alleges that the defendants misrepresented the pool's trading activities by deceiving customers as to the status of their accounts through use of false account statements and that they misappropriated funds by using them for personal and unrelated business expenses.
Specifically, during the period from at least January 1994 through at least August 1995, the complaint alleges that the defendants fraudulently solicited and Prism received approximately $1,000,000 for investment in Prism LLC. The defendants allegedly told customers that by investing in Prism LLC their funds would be deposited into two accounts: 60 percent into an S&P 500 futures trading program and the remainder in mutual funds to protect against unlikely losses in the trading program. The defendants never used the trading program, the complaint alleges, and deposited less than $4,000 of customer funds into a money market fund. By the end of August 1994, it is alleged that $448,500 received from pool participants had been deposited into Prism LLC, and all but $30,849 of those funds had been lost.
In addition, the CFTC complaint charges that the defendants violated numerous disclosure, reporting, and recordkeeping requirements of federal commodity law and CFTC regulations.
CFTC Seeks Permanent Injunctions and Civil Monetary Fines,
Among other Sanctions, Against the Defendants
In its continuing litigation against the defendants, the CFTC is seeking preliminary and permanent civil injunctions, in addition to other remedial relief, including an accounting, disgorgement, rescission, and restitution. The complaint also is seeking a civil monetary penalty against each defendant of $100,000, or triple the monetary gains to the defendant, whichever is greater, for each violation of the CEA.