Release: #4116-98 (98-CIV-1365)
For Release: March 10, 1998
CFTC CHARGES HANOVER TRADING CORP. AND DUPONT GROUP, INC.,
BOTH OF NEW YORK, THEIR PRESIDENT MICHAEL SINGER, AND A SALESPERSON IN NATIONWIDE TELEMARKETING SCHEME INVOLVING THE FRAUDULENT SALE OF ILLEGAL OFF-EXCHANGE FUTURES CONTRACTS
Court Issues Ex Parte Order Freezing Assets of Defendants and Seven Others Alleged to Have Received Fraudulently Obtained Funds Totaling At Least $900,000 From At Least 100 Customers Nationwide
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on February 25, 1998, it filed a three-count civil injunctive action in the U.S. District Court for the Southern District of New York against Hanover Trading Corp. (Hanover), Dupont Group, Inc. (Dupont), Michael Singer, who is the president of both firms, all located in New York, New York, and William Droge, a Hanover telemarketer of Great Neck, New York, charging them with fraudulently selling illegal off-exchange futures contracts in heating oil, unleaded gasoline, and other commodities to at least 100 customers nationwide, obtaining at least $900,000 in customer funds. From November 1996 to the present, none of the defendants has been registered with the CFTC in any capacity.
On the same day, the court entered an ex parte order, which, among other things, freezes the assets of the defendants and seven others named as relief defendants who are alleged to have received funds directly traceable to the alleged fraud. On March 3, 1998, the Honorable Lewis A. Kaplan entered an order of preliminary injunction against the defendants, which continues the ex parte relief and prohibits defendants Hanover, Dupont, Singer, and Droge from engaging in further violations of federal commodity law, as charged in the CFTC complaint.
The complaint alleges that, from at least November 1996 and continuing into the present, defendants Hanover, Dupont, and Singer in violation of Section 4b of the Commodity Exchange Act (CEA) have misappropriated customer funds; that Hanover and Dupont have issued false reports to customers that serve to hide this misappropriation; and that defendants Hanover, Dupont, and Droge have cheated and defrauded customers through false claims concerning the likelihood of profit and the risk of loss associated with Hanover's trading program. The complaint also charges Hanover, Dupont, and Droge with violating Section 4(a) of the CEA by offering and selling illegal, off-exchange futures contracts.
According to the CFTC complaint, Hanover telemarketers claim that they are offering a brief, but highly profitable, investment opportunity in such commodities as heating oil and unleaded gasoline. The complaint alleges that telemarketers tell each customer that they will monitor the market and advise when the price of the commodity purchased has peaked -- which allegedly will occur due to seasonal demands for the purchased commodity. The complaint alleges that, in fact, the trading scheme has caused substantial losses. Moreover, the CFTC complaint charges that Hanover does not purchase commodities or establish futures positions sufficient to cover customers' deposits. The complaint alleges that, instead, Hanover, Dupont, and Singer siphon off a substantial portion of the funds through undisclosed fees, commissions, and interest charges and make substantial payments to various individuals.
Geoffrey Aronow, Director of the CFTC's Division of Enforcement, commented:
"This case is part of the Commission's continuing fight against unscrupulous telemarketers of heating oil, unleaded gasoline, precious metals, and other commodity futures contracts. Often, these fraud artists tout quick riches based on predictable changes in seasonal demands or current news stories. Consumers should realize that market prices usually already reflect that type of public information. Individuals should be skeptical of high-pressure phone sales and promises of high profits with little risk."
In its continuing litigation against the defendants, the CFTC is seeking a permanent injunction in addition to other remedial relief, including restitution to investors. The CFTC gratefully acknowledges the assistance of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.