Release: #4129-98 (Civ-98-Civ-00216J)
For Release: April 1, 1998
CFTC FILES COMPLAINT AND OBTAINS AN EX PARTE ASSET FREEZE
AGAINST EIGHT IN UTAH ACCUSED OF COMMODITY FRAUD
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on March 27, 1998, it filed a six-count complaint in U.S. District Court for the District of Utah, Central Division, seeking a permanent injunction against eight defendants for violating the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, as well as emergency relief.
On the same day the complaint was filed, the Honorable Bruce Jenkins entered an ex parte statutory restraining order freezing the assets of all defendants, prohibiting them from destroying any of their books and records, and requiring them to make their books and records available for inspection by the CFTC.
The defendants named in the CFTC enforcement action are: John Larry Schenk, his sons Mark Schenk and Steve Schenk, Sam Gray, Douglas Foster, Robert Moncur, and Brian Tobler, all of whom are residents of the Salt Lake City area, and Fidelity Traders Group, a Utah corporation.
In the complaint the CFTC alleges that the defendants defrauded more than 50 customers in Idaho and Utah who had invested more than $700,000 in at least three commodity pools over a four-year period. The complaint charges that in operating these pools, from at least 1993 through the present, the defendants violated the CEA by, among other things:
$ misappropriating funds received from investors;
$ representing to investors that their funds would be used only to trade commodities when they were used for non-authorized expenses of the pools;
$ issuing false account statements to customers, which showed that their investments were profitable when they were not;
$ misrepresenting the trading experience and track record of the individual who made the investment decisions for the pools; and
$ failing to disclose the fees and commissions the customers would be charged.
In addition, the complaint charges that the defendants violated CFTC regulations by accepting customer funds in the names of entities other than the commodity pools the customers intended to invest in, commingling assets of some of the pools with assets of others and failing to provide proper disclosures to customers before they invested in the pools. Four defendants were also charged with operating commodity pools without being registered with the CFTC.
The complaint asks the court to enjoin each defendant from further violations of the CEA and CFTC regulations, disgorgement of all benefits received, restitution to the defrauded investors, and civil monetary penalties.
The CFTC appreciates the assistance of the State of Utah Department of Commerce, Division of Securities, in this investigation.