#4295-99 (#4241-99, CFTC Docket No. 99-7)
For release: July 29, 1999
CFTC ACCEPTS SETTLEMENT OFFERS OF KEVIN JACKAM, MICHAEL THOMAS AND NEW MILLENIUM PROMOTIONS IN CASE INVOLVING THE FRAUDULENT SOLICITATION OF CUSTOMERS
CFTC Finds That Jackam Committed Fraud In Soliciting Customers To Trade Options On Commodity Futures Contracts And Failed To Supervise, and That Thomas And New Millenium Failed To Supervise And Acted In An Unregistered Capacity While Operating An Introducing Broker
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on July 29, 1999, it issued orders accepting offers of settlement from Kevin Jackam (Jackam), Michael Thomas (Thomas) and New Millenium Promotions (NMP), all located in the Atlanta, Georgia area, in connection with a complaint filed by the CFTC on March 4, 1999 (see CFTC News Release #4179-98, August 17, 1998). As the CFTC found, this case involved, among others things, the fraudulent solicitation of customers over the Internet to trade options on commodity futures.
The CFTC issued an order as to Jackam, finding that Jackam, as a principal, twenty percent owner, and compliance officer of a registered introducing broker (IB), violated anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, specifically section 4c(b) and regulation 33.10, and that Jackam aided and abetted, and as a controlling person of the IB was liable for, the IB's fraudulent solicitation of customers.
Specifically, the CFTC order finds that Jackam coordinated the development of, and reviewed and approved the content of, all of the IB's promotional materials, including radio and Internet advertising and written "Special Reports," which misrepresented, among other things, the likelihood of profit from, and the risk of loss involved in, trading commodity options. The order also finds that Jackam misled customers concerning the amount of commissions charged by the IB for options trading. The order further finds that Jackam failed to supervise diligently the agents and employees of the IB who prepared and disseminated Internet advertising on behalf of the IB.
The CFTC issued a separate order as to Thomas and NMP, finding that NMP operated as an introducing broker without being registered, by soliciting prospective customers over the Internet on behalf of the IB in return for a fee, in violation of section 4d(1) of the CEA, and that Thomas, as sole employee of and the person responsible at NMP for generating prospective customers for the IB, acted as an associated person (AP) of NMP without being registered, in violation of section 4k(1) of the CEA and regulation 3.12(a)
The CFTC order also finds that Thomas and NMP contracted with another respondent, Forrest Dayton, Jr., to disseminate the Internet advertisements on behalf of the IB and that, despite being responsible for supervising Dayton, Thomas and NMP failed to implement or follow a program of supervision. This resulted in Dayton sending Internet advertisements that contained misleading language to prospective customers of the IB. NMP and Thomas thereby failed to supervise diligently the activities of Dayton. On May 26, 1999, a default judgment was issued against Dayton, finding that he acted as an AP of NMP without being registered, in violation of section 4k(1) of the CEA and regulation 3.12(a), and ordering Dayton to cease and desist from violating those provisions and to pay a civil monetary penalty of $273,000.
Jackam, without admitting or denying the findings, consented to the entry of an order:
-- directing him to cease and desist from further violations as charged;
-- prohibiting him from trading on or subject to the rules of any contract market;
-- imposing a $200,000 restitution award, to be paid pursuant to a five-year payment plan; and --requiring him to comply with certain undertakings, including (1) cooperating with the Division in this proceeding; and (2) never applying for registration or claiming exemption from registration in any capacity.
Thomas and NMP, without admitting or denying the findings, consented to the entry of an order:
-- directing them to cease and desist from further violations as charged; and
-- requiring them to comply with certain undertakings, including never applying for registration or claiming exemption from registration in any capacity.
In the orders, the CFTC notes that orders of immediate restitution and civil monetary penalties against Jackam, Thomas and New Millenium would be appropriate, but does not impose them based upon their demonstrated financial condition.
The case continues as to the other respondents named in the CFTC complaint.