Release: 4172-98 (Civ 97-838)

For Release: July 28, 1998


State of Oregon Joined CFTC as Co-Plaintiff in the Anti-Fraud Action Charging that Defendants Committed Fraud by Providing False Statements and Misappropriating Funds, Among Other Violations of Federal Commodity and State Securities Law

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) and the Oregon Department of Consumer and Business Services announced today that on July 22, 1998, the Honorable Garr I. King, U.S. District Judge for the District of Oregon, entered a consent order of permanent injunction against Michael Myatt, PragmaCapital Corporation, and the Berkshire International Hedge Fund II L.P., all of Beaverton, Oregon. None of the defendants has ever been registered with the CFTC in any capacity.

The Oregon Department of Consumer and Business Services joined the action as co-plaintiff on January 16, 1998.

Court's Order Finds that Defendants Received About $3.9 Million from at least 168 Customers to Pool for Trading Commodity Futures and Securities

The order, which stems from a three-count CFTC injunctive complaint filed on June 4, 1997 (see CFTC News Release 4026-97, June 5, 1997), finds that the defendants committed fraud in connection with the operation of an unregistered commodity pool. Under terms of the consent order, Myatt agrees to make restitution to customers.

Specifically, the order finds that from January 1996 through June 1997, Myatt solicited, accepted, and received $3,931,524 from at least 168 customers to pool for trading commodity futures and securities. The order finds that Myatt violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and Oregon Securities law by fraudulently reporting profits and issuing false statements to customers regarding purported profits earned, when, in fact, the accounts had incurred significant losses.

Defendants Falsely Reported Profits of Between 171 Percent and 422 Percent Annually

According to the order, the defendants falsely reported profits of between 171 percent and 422 percent per year, including monthly profits ranging from 8 percent to 15 percent. Funds deposited for participation in the pool were not kept separate from the defendants' assets and were used for personal expenses, to pay referral fees or commissions to persons who solicited additional investors, or for operating expenses. The order states that in excess of $1.8 million was lost in trading or spent by the defendants.

Additionally, the order finds that the defendants acted as a commodity pool operator (CPO) without being registered as such with the CFTC, and that defendants violated Oregon Securities law by selling securities without being properly licensed to sell securities or to act as an investment advisor.

Finally, the order permanently enjoins the defendants from committing further violations of the CEA and Oregon Securities law as charged, from acting in any capacity requiring registration with the CFTC or licensing under Oregon Securities law, and from trading on any commodity futures contract market.

Receiver to Distribute Approximately $2 Million to Investors

The order directs Gilardi and Company, as the court-appointed Permanent Equity Receiver (Tel:[415] 461-0410), to prepare a distribution plan for the defendants' assets and, with court approval, distribute funds on a pro-rata basis. The Receiver holds approximately $2 million in defendants' assets.

Furthermore, the order directs the defendants, depending on their income level, to continue to make repayments of customer losses for five years to the National Futures Association, acting as Monitor.