Release: 4332-99 (CFTC Docket Nos. 98-13 and 99-10)
For Release: November 3, 1999
CFTC ACCEPTS SETTLEMENT OFFERS OF TODD ALAN THOMAS AND WELLINGTON FINANCIAL GROUP, INC. IN CONNECTION WITH THE FRAUDULENT SOLICITATION OF CUSTOMERS
CFTC Order Accepting Settlement Offers Finds That Thomas and Wellington Committed Fraud In Soliciting Customers To Trade Commodity Future Options, Revokes Their Registrations, and Prohibits Them From Trading; Thomas Is Required to Pay $1.9 Million in Restitution to Defrauded Customers
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on November 3, 1999, it issued an order accepting offers of settlement from Todd Alan Thomas, of Boca Raton, Florida, and Wellington Financial Group, Inc., of Ft. Lauderdale, Florida, in connection with a complaint filed against Thomas on April 27, 1998 and a complaint filed against Wellington on March 30, 1999 (see CFTC News Release 4250-99 March 31, 1999 and CFTC News Release 4139-98, April 28, 1998).
The CFTC order finds that Thomas, a registered associated person (AP), and Wellington, a registered introducing broker (IB), fraudulently solicited customers to trade options on commodity futures contracts in violation of anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, specifically section 4c(b) of the CEA and regulation 33.10.
The CFTC order finds that while employed by a registered IB in Florida from December 1992 through March 1996 and from August 1996 through January 1997, Thomas appeared in over 50 radio infomercials and solicited customers who responded to the infomercials. The order further finds that after establishing Wellington, as its sole principal and owner, Thomas produced and appeared in infomercials for Wellington similar to those used by the Florida IB.
The CFTC Order Further Finds that Approximately 90 Percent of Thomas' Customers Lost Money Resulting in Total Losses of Approximately $1.2 Million
The CFTC order further finds that in both the infomercials and the telephone sales solicitations, Wellington, through Thomas and other APs, and Thomas, while employed by the Florida IB and at Wellington, misrepresented the likelihood of profit from, and the risk of loss involved in, trading commodity options. Specifically, the order finds that Wellington and Thomas overstated the ability to exploit seasonal and other existing and known supply and demand forces in the cash markets for various commodities to profit on options on futures contracts in these
commodities; downplayed the risk inherent in such options; and overstated customers' performance records in trading them. The CFTC order further finds that approximately 90 percent of Thomas' customers lost money, resulting in total losses of approximately $1.2 million and that more than 90 percent of the accounts opened with Wellington lost money, resulting in total losses of approximately $800,000.
Thomas and Wellington, without admitting or denying the findings, consented to the entry of an order:
-- finding that they committed fraud in violation of section 4c(b) of the CEA and regulation 33.10;
-- directing them to cease and desist from further violations as charged;
-- revoking Thomas' registration as an AP of Wellington and revoking Wellington's registration as an IB;
-- prohibiting them from trading on or subject to the rules of any contract market;
-- requiring Thomas to pay $1.9 million in restitution, plus prejudgment interest, pursuant to a five-year payment plan; and
-- requiring them to comply with certain undertakings, including never applying for registration or claiming exemption from registration in any capacity and never engaging in any activity requiring such registration or exemption from registration.
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