Release: #4067-97 (97-Civ-01478)

For Release: October 23, 1997


WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on October 23, 1997, it filed a five-count civil injunctive complaint against Brien Sullivan of Honolulu, Hawaii, doing business as Brien Sullivan Capital Management and as Lava Trading, alleging that since January 1994, Sullivan engaged in a fraudulent scheme whereby he defrauded investors in individual managed accounts under his management and in a commodity pool that he controlled, in violation of the Commodity Exchange Act (CEA) and CFTC regulations. Sullivan has never been registered with the CFTC.

Specifically, the CFTC complaint alleges that from January 1994 to March 1997, Sullivan induced his friends and acquaintances to become investors by falsely representing that he would trade their money in accounts with legitimate futures commission merchants (FCMs) -- either in their individual names or through a commodity pool. However, Sullivan allegedly did not open any actual FCM accounts in customers' names. Instead, he pooled only 5 percent of $450,000 that at least 15 customers entrusted to him in an account at an FCM in his own name, according to the CFTC complaint. Sullivan did not pool investors' funds earmarked for commodity futures trading for that purpose, but instead, he allegedly misappropriated virtually all of the pooled investor money, according to the complaint.

In addition, the CFTC alleges that Sullivan mailed false account statements to his customers on the letterhead of Lava Trading showing profitable but fictitious futures trading. The CFTC alleges, however, that trading records from Sullivan's personal accounts show that he used very little of his pool participants' money in futures trading and that his actual trading bore no relationship to the trading reflected on Lava Trading's false account statements.

Hawaii Court to Consider CFTC's Motion for a Preliminary Injunction

In November 1997, the U.S. District Court for the District of Hawaii will consider the CFTC's motion for a preliminary injunction, which requests that the court enjoin Sullivan from violating the CEA, from engaging in any commodity-related activity, including soliciting new customers or customer funds, and from trading for himself or others.

In its litigation against Sullivan, the CFTC is also seeking a permanent civil injunction in addition to other remedial relief, including an accounting, disgorgement of unlawfully obtained benefits, and civil penalties in amounts of not more than the higher of $110,000 ($100,000 for violations occurring before November 28, 1996) or triple the monetary gain to Sullivan for each violation of the CEA and CFTC regulations.