Release: #4098-98 (97-Civ-01478)

For Release: January 20, 1998


WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on January 6, 1998, the Honorable Alan C. Kay of the U.S. District Court for the District of Hawaii entered an order of preliminary injunction against Brien Sullivan, doing business as Brien Sullivan Capital Management and as Lava Trading. Sullivan formerly lived in Honolulu, Hawaii and has never been registered with the CFTC.

The court's preliminary injunction stems from a five-count anti-fraud civil injunctive complaint filed on October 23, 1997, alleging, among other things, that since January 1994 Sullivan engaged in a fraudulent scheme whereby he defrauded investors in individual futures accounts under his management and in a commodity pool that he controlled, in violation of the Commodity Exchange Act (CEA) and CFTC regulations (see CFTC News Release #4067-97, October 23, 1997).

Preliminary Injunction Effectively Bars Sullivan from the Futures Industry

The court's preliminary injunction enjoins Sullivan from violating the anti-fraud provisions of the CEA and CFTC regulations as charged, prohibits him from soliciting customer funds, from trading any commodity futures account for himself or for others and from engaging in any activities related to the business of commodity futures trading, and requires him to make an accounting of his assets.

Specifically, the CFTC complaint alleges that Sullivan induced his friends and acquaintances to become investors by falsely representing that he would trade their money in accounts with legitimate futures commission merchants (FCMs), either in their individual names or through a commodity pool. However, Sullivan allegedly did not open any actual FCM accounts in customers' names. Instead, he allegedly pooled only 5 percent of the $450,000 that at least 15 customers entrusted to him in his own FCM account.

In addition, the CFTC alleges that Sullivan mailed false account statements to his customers on the letterhead of Lava Trading showing profitable but fictitious futures trading. The CFTC further alleges that trading records from Sullivan's personal accounts show that he used very little of his pool participants' money in futures trading, that his actual trading bore no relationship to the trading reflected on Lava Trading's false account statements, and that he misappropriated most of his customers' money.

In its litigation against Sullivan, the CFTC is also seeking a permanent civil injunction in addition to other remedial relief, including an accounting, disgorgement of unlawfully obtained benefits, and civil penalties in amounts of not more than the higher of $110,000 ($100,000 for violations occurring before November 28, 1996) or triple the monetary gain to Sullivan for each violation of the CEA and CFTC regulations.