For Release:July 16, 1996
CFTC FILES NINE-COUNT COMPLAINT AND OBTAINS PRELIMINARY INJUNCTION AGAINST EDWARD W. SCHROEDER, THE EDWARD W. SCHROEDER LIVING TRUST, AND ANDRE D. FITE OF SANTA MONICA AND LOS ANGELES, CALIFORNIA
Defendants Are Charged with Defrauding More than 40 Commodity Pool
Customers of an Amount in Excess of $3 Million
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on July 11, 1996, U.S. District Court Judge Harry L. Hupp of the Central District of California in Los Angeles entered a preliminary injunction against Edward W. Schroeder, the Edward W. Schroeder Living Trust -- both of Santa Monica, California, and Andre D. Fite of Los Angeles, California. None of the defendants has ever been registered with the CFTC in any capacity.
The court's preliminary injunctive order stems from a nine- count civil injunctive complaint filed by the CFTC on July 1, 1996, alleging, among other things, that defendants violated the anti- fraud provisions of the Commodity Exchange Act (CEA) by cheating and defrauding customers. In addition, Schroeder and the Schroeder Trust are alleged to have converted customer funds to personal use in connection with acting as unregistered commodity pool operators. The complaint states that since at least June 1990, Schroeder has solicited members of the public, by mail, telephone and other means of interstate commerce, to participate in a commodity pool, and that in August 1994, he created the Edward W. Schroeder Living Trust.
Specifically, the CFTC complaint alleges that Schroeder, both individually and as Trustee of the Schroeder Trust, through misrepresentations and false statements, obtained and converted in excess of $3 million from approximately 40 customers, while acting illegally as a commodity pool operator. According to the complaint, "Schroeder treated pool funds as his own property, using them to pay his personal expenses and to make deposits into his personal bank accounts."
The complaint further alleges that Schroeder and the Schroeder Trust received investor funds in a name other than that of the pool's, commingled pool property with assets of other persons, and that Fite acted as an unregistered associated person of the commodity pool.
Finally, the complaint alleges that the defendants advertised the pool in a fraudulent or deceptive manner and failed to provide required disclosure documents to customers. According to the complaint, Schroeder suffered over $1 million in commodities trading losses while assuring customers that he was earning high profits. Schroeder and Fite, for example, told some pool participants that the pool had a 62-month unbroken string of profits, that their investments would be without risk, and that the pool guaranteed rates of return between 18 and 36 percent annually, paid monthly.
On the same day the complaint was filed, the court granted the CFTC an ex parte restraining order, which freezes the defendants' assets, including accounts in which investors' funds were alleged to have been deposited, and prohibits the destruction of the defendants' books and records. Subsequently, on July 2, 1996, the court issued a temporary restraining order, which continued the asset freeze and prohibited further violations of the CEA as charged in the complaint.
Preliminary Injunction Continues Ex Parte Freeze of Defendants' Assets and Requires that Schroeder Make an Accounting of Customers' Funds with the Court
The preliminary injunction 1) continues the asset freeze, 2) enjoins the defendants from violating provisions of the CEA requiring registration for commodity pool operators and prohibiting fraud and misappropriation of customers' funds, 3) enjoins the defendants from further soliciting customers or accounts, and 4) orders defendant Schroeder to file an accounting of customer funds with the court within 30 days.
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