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• CFTC v. Abad, et al.
  
  On December 1, 2008, the Commission filed a civil enforcement action against Paul Abad and his company, Thirteen Thirty-Two, Inc. (1332), charging them with misappropriating customer funds and concealing trading losses in connection with operating a fraudulent commodity pool. The CFTC complaint alleges that, from approximately February 2001 through early 2008, the defendants solicited at least $400,000 from the general public to trade commodity futures contracts through a commodity pool operated by 1332 and through individual managed accounts, which Abad managed. The complaint also asserts that the defendants sustained approximately $122,000 in trading losses, returned some funds to pool participants, and misappropriated approximately $230,000. Throughout the period, as alleged, defendants routinely sent false statements to pool participants and clients, reflecting profitable returns from defendants’ trading on their behalf. During 2008, as pool participants and clients demanded that Abad return their funds, Abad purportedly blamed 1332’s introducing broker for causing delays and created fictitious emails from an employee of the introducing broker indicating a trading account balance of over $180,000 in an account in 1332’s name. In reality, as alleged, that particular account had a balance of $110 and 1332’s only other account with the introducing broker had a zero balance. On the same day the complaint was filed, the court entered a statutory restraining order that, in part, preserved books and records. The Commission received cooperation from the Orange County Sheriff’s Department and the California Department of Corporations in connection with this matter. CFTC v. Abad, et al., No. SACV 08-1352-AG(RNBx) (C.D. Cal. filed Dec. 1, 2008).
• In re Innovative Capital Management, LLC, et al.
  
  On December 19, 2008, the Commission simultaneously filed and settled an administrative enforcement action against registered CPO and CTA Innovative Capital Management, LLC (Innovative), and its principal, registered AP, and sole owner, Yehuda Belsky (Belsky), finding they committed fraud in their operation of a commodity pool. Specifically, the CFTC order finds that from approximately September 2006 through February 2008, Belsky and Innovative fraudulently obtained funds totaling $1,250,000 from five commodity pool participants. Instead of using the solicited funds to purchase commodity futures and/or options contracts—as represented in solicitation materials—Belsky and Innovative misappropriated at least $385,000 of those funds, created false commodity pool account statements misstating the net asset value and monthly rates of return of the pool and then delivered these fraudulent statements to pool participants. The order also finds that, during a routine audit by the NFA, Belsky and Innovative provided it with fraudulent account statements purportedly prepared by the futures commission merchant where the pool’s account was maintained and, fraudulent bank statements that falsely inflated the amount of pool funds on deposit at that bank. The Commission assessed sanctions including: a cease and desist order; permanent trading and registration bans; restitution ($1,250,000, jointly and severally); and a civil monetary penalty ($100,000, jointly and severally). The Commission received cooperation from the NFA in connection with this matter. In re Innovative Capital Management, LLC, et al., CFTC Docket No. 09-04 (CFTC filed Dec. 19, 2008).
• CFTC v. Forte
  
  On January 7, 2009, the Commission filed a civil injunctive action against Joseph S. Forte charging him with operating a $50 million Ponzi scheme in connection with the Joseph Forte, L.P. commodity futures pool. The CFTC’s complaint charges Forte with: 1) solicitation fraud; 2) misappropriation of pool funds; 3) sending customers false account statements; and 4) failing to register with the CFTC as a commodity pool operator. The CFTC complaint alleges that from at least February 1995, Forte fraudulently solicited approximately $50 million from dozens of individuals and entities to participate in a commodity futures pool to trade, among other things, S&P 500 stock index futures, foreign currency futures, and metal futures. In soliciting prospective and existing participants, Forte claimed he was a successful commodity futures trader and that his pool had a successful track record. For example, in a solicitation memorandum directed to a church, Forte represented that the eight-year annual return on the fund ranged from 18.52 percent to 36.19 percent. To conceal his ongoing fraud, Forte failed to register with the CFTC and provided quarterly account statements to pool participants showing consistently profitable returns of the pool and eventually reporting that as of late 2008, the pool had increased in value to over $154 million. In reality, however, Forte was neither successfully trading nor making an effort to do so. When trading, Forte purportedly sustained net losses of at least $3 million trading almost exclusively the S&P 500 futures contract on behalf of the pool. However, during a 34-month period from 2004 into 2007, Forte purportedly conducted little to no trading at all. Forte allegedly failed to deposit any funds into the trading account during a 53-month period from October 2002 to February 2007. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Fort Worth Regional Office of the SEC in connection with this matter. CFTC v. Forte, No. 09-0064PD (E.D. Pa. filed Jan. 7, 2009).
• CFTC v. Agape World, Inc., et al.
  
  On January 27, 2009, the Commission filed a civil injunctive action against Nicholas Cosmo, Agape World, Inc. (Agape World), and Agape Merchant Advance LLC (Agape Advance) charging them with defrauding customers of tens of millions of dollars. In its enforcement action, the CFTC alleges that defendants solicited tens of millions of dollars from customers for the stated purpose of investing in bridge loans and merchant advances. Defendants then misappropriated a significant portion of those funds to engage in unauthorized commodity futures trading. Defendants’ unauthorized commodity futures trading resulted in tens of millions of dollars in losses, none of which were ever disclosed to investors. In 1999, Cosmo, then a licensed stock broker and account executive, pleaded guilty to mail fraud after admitting to commingling funds, purposely misleading investors, and forging documents. Cosmo was sentenced to a 21-month prison term followed by three years of supervised release and payment of restitution. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Postal Inspection Service, the FBI, and the SEC in connection with this matter. CFTC v. Agape World, Inc., et al., No. 09 0351 (E.D.N.Y. filed Jan. 27, 2009).
• CFTC v. Crossfire Trading, LLC, et al.
  
  On February 5, 2009, the Commission filed a civil injunctive action against Charles “Chuck” E. Hays and his company, Crossfire Trading, LLC (Crossfire), charging them with fraud and misappropriation in connection with a commodity pool Ponzi scheme. The CFTC’s complaint alleges that, since January 2006, Hays and his company, Crossfire, a purported commodity pool, fraudulently solicited and accepted more than $5.5 million from at least three individuals and a charitable foundation for the purpose of trading stock index and crude oil futures. Hays, according to the complaint, convinced at least one person to invest in Crossfire by representing verbally and in fabricated account statements—issued on Crossfire’s letterhead—that Crossfire earned consistent profits trading commodity futures with no losing months. However, as charged in the complaint, Crossfire has never had an active commodity futures trading account. Additionally, in an attempt to alleviate at least two investors’ suspicions as to what Hays was actually doing with their money, Hays provided an account statement for the Crossfire pool fabricated to appear as if it were issued by a legitimate brokerage company by using that brokerage’s letterhead. This false account statement indicated that Crossfire maintained a trading account at the brokerage with over $37 million. As alleged, that account is nonexistent. Hays was arrested by Federal authorities on the same day the Commission’s complaint was filed. The Commission received cooperation from the U.S. Attorney’s Office for the District of Minnesota, the U.S. Department of Justice, the U.S. Postal Inspection Service, and the FBI in connection with this matter. CFTC v. Crossfire Trading, LLC, et al., No. 09 CIV 259 DWF/AJB (D. Minn. filed Feb. 5, 2009).
• CFTC v. Trimble, et al.
  
  On February 9, 2009, the Commission filed a civil injunctive action against Mark S. Trimble and his company, Phidippides Capital Management LLC (PCM) charging them with operating a private hedge fund named Phidippides Capital LP (Phidippides Capital) as a Ponzi scheme. The CFTC’s complaint alleges that, from at least 2005, Trimble and PCM operated a $34 million hedge fund with approximately 60 investors and traded partly in the name of Phidippides Capital. Since at least October 2007, defendants allegedly issued false account statements, failed to disclose the fund’s actual multi-million trading losses, and operated the fund as a Ponzi scheme. Additionally, defendants allegedly received over $1 million in management fees based on false reports of trading profits. According to the complaint, Trimble’s activities were exposed in late January 2009, after Trimble provided the FBI a fictitious 2008 year-end trading account showing millions of dollars in trading profits that did not square with actual trading statements issued by Trimble’s brokerage firm that disclosed millions of dollars in trading losses. Trimble subsequently stated in an email sent to his brokerage firm, and addressed to “Family, Friends, and Clients,” that he had not been “honest” about the hedge fund’s trading results, explaining: “The reason our balances are off is because I could not look myself in the mirror and face all of you and notify you that in the last quarter of 2008 we lost all the profits for the year and then some.” On March 6, 2209, the court entered a Consent Order of Preliminary injunction freezing assets and preserving books and records. The Commission received cooperation from the SEC and the Financial Crimes Enforcement Network in connection with this matter. CFTC v. Trimble, et al., No. 5:09-cv-00154-D (W.D. Okla. filed Feb. 9, 2009).
• CFTC v. Brookshire Raw Materials Management, LLC, et al.
  
  On February 19, 2009, the Commission filed a civil injunctive action against commodity pool operator, Brookshire Raw Materials Management, LLC (BRM), and its principals John M. Marshall and Stephen Z. Adams, Brookshire Raw Materials Group, Inc. (BRMG) and Brookshire and Company, Ltd. (BCL) charging the defendants with misappropriating more than $4.6 million of customer funds and destroying records, among other things. As alleged in the CFTC’s complaint, between September 2006 and December 2008, Marshall, Adams, and BRM accepted millions of dollars from customers for investment in a commodity pool known as the Trust and operated as a Ponzi scheme. The Trust is governed by a Private Placement Memorandum (PPM), which, among other things, states that each fund in the commodity pool will invest customer proceeds in a portfolio of commodity futures and forward contracts designed to approximately replicate the investment methodology of corresponding indices developed and managed by BRMG. However, as alleged, Marshall and Adams, as agents and officers of BRM, BRMG, and BCL withdrew more than $5 million from the Trust account and wired those funds to bank accounts in Canada, mostly in the care of Marshall. Under the PPM, the only authorized withdrawals from the Trust are fees, expenses, and participant redemptions. As alleged, management fees and expenses for the relevant time period totaled only $401,708. Furthermore, the CFTC complaint charges that Marshall and Adams did not disclose their unauthorized withdrawal of more than $4.6 million in customer funds from the commodity pool and issued false monthly pool statements overstating the value of the pool while hiding the withdrawals. According to the complaint, in December 2008, Marshall and Adams closed their offices, destroyed company data stored on computer servers, and failed to acknowledge redemption requests. BRM allegedly has failed to produce required financial documents regarding the operation of the commodity pool in response to recent CFTC requests. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Ontario Securities Commission, the NFA, and the Financial Crimes Enforcement Network in connection with this matter. CFTC v. Brookshire Raw Materials Management, LLC, e al., No. 09CV1056 (N.D. Ill. filed Feb. 19, 2009).
• CFTC v. Bloom, et al.
  
  On February 25, 2009, the Commission filed a civil injunctive action against fund manager Mark Evan Bloom and his firm, North Hills Management LLC (NHM) charging them with: misappropriating over $13 million of the assets of a fund they managed, North Hills LP. (Fund), and investing Fund assets contrary to the represented investment strategy. Bloom and NHM are also charged with defrauding Fund participants in connection with distributions made in the name of the Fund in a 2005 CFTC anti-fraud action brought against another fund operator, the Philadelphia Alternative Asset Management Company (PAAM) and Paul Eustace. (See CFTC v. Philadelphia Alternative Asset Management Company, et al., No. 05cv2973 (E.D. Pa. June 21, 2005).) According to the CFTC’s complaint, Bloom originally formed the Fund and created NHM, with the purported design of an enhanced stock index fund, trading, among other things, commodity futures contracts and options. In 2001, Bloom converted the Fund into a “fund of funds” (an investment strategy of holding a portfolio of other investment funds). The CFTC’s complaint alleges that Bloom, instead of following the purported strategy of the Fund, misappropriated at least $13 million from the Fund for the personal use of Bloom and his wife. The CFTC’s complaint also alleges that after taking over $13 million for his personal use, in 2004 and 2005, Bloom invested approximately $17 million of Fund assets in a high risk commodity futures and options fund (PAAF) operated by PAAM. This investment represented at least half of the assets of Fund and was contrary to the moderate risk asset allocation strategy Bloom represented was the strategy for the Fund. Fund participants only learned of the concentrated PAAF investment after the CFTC sued and shut down PAAM and Eustace in late June 2005. Bloom also failed to inform Fund participants that he had received referral fees totaling $1.6 million for referring prospective investors to PAAM, including Fund. Allegedly, Bloom also never informed Fund participants that a receiver appointed in the CFTC action had distributed approximately $9 million in distributions in the name of Fund or that Bloom had compromised the North Hills’ interest in the PAAF distributions through a third party agreement. Bloom also never disclosed that he had received approximately $8 million in the name of the Fund pursuant to the third party agreement. Bloom has not accounted for those funds. The CFTC complaint further alleges that Bloom concealed his frauds from Fund participants by sending out monthly account statements showing profitable results and providing written updates on the progress of the CFTC’s action against PAAM and receiver’s efforts to recover assets. Based on Bloom’s rosy statements and updates, Fund participants expected to receive distributions from the receivership estate. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC, U.S. Attorney’s Office for the Southern District of New York and the NFA in connection with this matter. CFTC v. Bloom, et al., No. 09 CV 1751 (S.D.N.Y. filed Feb. 25, 2009).
• CFTC v. Walsh, et al.
  
  On February 25, 2009, the Commission filed a civil injunctive action against Stephen Walsh and Paul Greenwood charging them with misappropriating at least $553 million from commodity pool participants in connection with entities they owned and controlled: defendants Westridge Capital Management, Inc.; WG Trading Investors, LP; and WGIA, LLC. At the same time, the Office of the U.S. Attorney for the Southern District of New York filed a criminal complaint against Walsh and Greenwood. The CFTC complaint alleges that, from at least 1996, Walsh and Greenwood fraudulently solicited approximately $1.3 billion from individuals and entities through Westridge Capital Management, WG Trading Investors, LP, and other entities. The complaint charges that the defendants defrauded victims by falsely depicting that all pool participants’ funds would be employed in a single investment strategy that consisted of index arbitrage. However, pool participants’ funds were transferred to another entity from which Walsh and Greenwood siphoned funds, according to the complaint. According to the complaint, to cover-up their misappropriation of pool participants’ funds, Greenwood and Walsh manufactured promissory notes to present the appearance that pool participants’ funds had been loaned to them. Walsh and Greenwood allegedly misappropriated approximately $553 million in pool participants’ funds. More than $160 million was used for Walsh and Greenwood’s personal expenses, including purchasing rare books, horses, Steiff teddy bears for as much as $80,000, and a $3 million residence for Walsh’s ex-wife. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the NFA, the Office of the U.S. Attorney for the Southern District of New York, the FBI, and the SEC in connection with this matter. CFTC v. Walsh, et al., No. 09 CV 1749 (S.D.N.Y. filed Feb. 25, 2009).
• CFTC v. Trigon Group, et al.
  
  On February 26, 2009, the Commission filed a civil injunctive action against Daren L. Palmer and the commodity futures pool he operated, Trigon Group, Inc., charging defendants with solicitation fraud and misappropriation of pool funds for personal use and for use in running a Ponzi scheme involving approximately $40 million. In addition, Palmer is charged with sending customers false account statements and failing to register with the CFTC as a commodity pool operator. The CFTC complaint alleges that, from at least September 2000 through present, Palmer fraudulently solicited approximately $40 million from dozens of individuals and entities to participate in a commodity futures pool to trade commodity futures or options on commodity futures contracts. In soliciting prospective and existing participants, Palmer allegedly claimed that he was a successful commodity futures trader, that his pool had a successful track record, and that the pool achieves positive returns of as much as seven percent monthly and 20 percent annually. The complaint alleges that, in reality, Palmer was neither successfully trading nor making an effort to do so. As alleged, despite taking in at least $40 million in participant funds since September 2000, Palmer only placed $4.5 million in his trading accounts. Moreover, Palmer admitted in sworn testimony that he used participants’ funds to pay principal and purported profitable returns to existing pool participants in a manner typical of a Ponzi scheme. He also admitted that he misappropriated pool funds for his personal use for the construction of a new home, to pay credit card bills, and purchase snowmobiles. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Idaho Department of Finance and the SEC in connection with this matter. CFTC v. Trigon Group, et al., No. CV-09-76-S-EJL (D. Idaho filed Feb. 26, 2009).
• CFTC v. Centurion Asset Management, Inc., et al.
  
  On March 3, 2009, the Commission filed a civil injunctive action against Dennis R. Bolze and his company, Centurion Asset Management, Inc. (CAM) charging them with fraudulently soliciting commodity pool participants, misappropriating participants’ funds, and issuing false statements to participants in a $20 million fraud involving at least 100 participants in the United States and Europe in a six-year-old scheme. The CFTC complaint alleges that, from at least spring 2002 through the date the complaint was filed, the defendants misappropriated pool participant funds and operated the commodity pool as a Ponzi scheme. Defendants allegedly misrepresented to prospective pool participants that Bolze’s trading generated annual profits of between from 15 and 20 percent and issued false account statements to give credibility to these misrepresentations. According to the complaint, despite accepting over $20 million, the defendants’ actual commodity futures trading accounts never exceeded $250,000 in equity, and Bolze’s trading during the relevant time resulted in approximately $800,000 of trading losses. According to the CFTC complaint, Bolze also failed to disclose to prospective pool participants that he plead guilty in 2001 to four counts of failing to file sales tax returns and failing to pay sales tax, resulting in a six-year prison sentence. The prison sentence was ultimately suspended, and Bolze was placed on supervised probation and fined. The Commission received cooperation from the SEC and the Comision Nacional del Mercado de Valores in connection with this matter. CFTC v. Centurion Asset Management, Inc., et al., No. 3:09-CV-88 (VARLAN/SHIRLEY) (E.D. Tenn. Filed March 4, 2009).
• CFTC v. Donnelly, et al.
  
  On March 11, 2009, the Commission filed a civil injunctive action against John M. Donnelly and three legal entities he created, Tower Analysis Inc., Nasco Tang Corp., and Nadia Capital Corp., charging them with operating a Ponzi scheme involving more than $10 million. The CFTC complaint alleges that Donnelly solicited individuals to invest in U.S. Treasury Note futures and S&P 500 futures. It further asserts that Donnelly operated three commodity pools for over seven years; however, neither Donnelly, nor any employee or agent of the other proposed defendants, actively traded the pools’ funds. Indeed, despite representations that his trading strategy required daily trading of the accounts, Donnelly only executed seven trades over the course of seven years. Despite the absence of trading, the investors still lost their funds because Donnelly misappropriated at least $1 million for himself and his wife. Donnelly may have received another $1.7 million from pool funds to which he was not entitled. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC and the U.S. Attorney’s Office for the Western District of Virginia in connection with this matter. CFTC v. Donnelly, et al., No. 3:09-CV-00016 (W.D. Va. filed March 11, 2009).
• CFTC v. Driver, et al.
  
  On May 14, 2009, the Commission filed a civil injunctive action against Gordon A. Driver and his companies, Axcess Automation LLC (Axcess Automation) and Axcess Fund Management LLC (Axcess Fund Management), charging them with fraudulently soliciting commodity pool participants, misappropriating participants’ funds, and issuing false statements to participants in a $13.5 million fraud involving over 100 participants in the United States and Canada. The Complaint alleges that the defendants in this Ponzi scheme, from at least February 2006, misrepresented to prospective pool participants that Driver’s trading generated monthly profits of around 20 percent and issued false account statements to give credibility to these misrepresentations. According to the complaint, despite accepting over $13.5 million, the defendants used only about $3.7 million for trading during the relevant time period, and Driver’s trading during that time resulted in approximately $3.5 million of trading losses, or 95 percent of the funds invested. According to the complaint, the defendants never informed the pool participants that they had traded only a portion of their funds and never informed them of the trading losses. Moreover, Driver misappropriated pool funds for his personal expenses, including cash withdrawals at Las Vegas casinos. In addition, the complaint charges Driver and Axcess Automation each with illegally acting as an unregistered CPO and Axcess Fund Management, a registered CPO, with failing to keep and produce, upon request by the CFTC, required books and records. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC, the Ontario Securities Commission, and the U.S. Attorney’s Office for the Central District of California in connection with this matter. CFTC v. Driver, et al., No. SACV09-0578 (C.D. Cal. filed May 14, 2009).
• CFTC v. Strongbow Investments GP, LLC, et al.
  
  On July 1, 2009, the Commission filed a civil injunctive action against Patrick J. Dailey and his company Strongbow Investments GP, LLC (Strongbow) charging them with operating a multi-million dollar fraudulent commodity pool and failing to maintain appropriate recordkeeping. Specifically, the complaint alleges that Strongbow, a registered CPO, and Dailey solicited at least $17 million from approximately 22 members of the general public for the purported purpose of investing in Strongbow and Strongbow Investments Fund II a commodity pool operated by Strongbow. The complaint further alleges that instead of using all investor money to trade commodity futures and options, Strongbow and Dailey commingled investor funds with funds in bank and trading accounts held in the names of Strongbow, Dailey, and third parties. The complaint also alleges that approximately $2.1 million in commingled funds are currently unaccounted for. Further, the complaint alleges that during a surprise audit by the NFA, defendants had only limited documentation to support their operations and were unable to produce other statutorily required records. For example, defendants could not provide documentation for: 1) the total amount of money invested in Strongbow or the pool; 2) how investor funds were allocated between Strongbow, the pool, investor distributions, redemptions, or agreements; or 3) any documentation of the funds that Dailey borrowed from the pool. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the NFA in connection with this matter. CFTC v. Strongbow Investments GP, LLC, et al., No. A09CA 497SS (W.D. Tex. filed June 30, 2009).
• CFTC v. Ross, et al.
  
  On September 2, 2009, the Commission filed a civil injunctive action against Maize Capital Management, LLC (Maize Capital) and its chief operating officer, Scott M. Ross, charging them solicitation fraud and issuing false statements involving a $6 million commodity pool. Another of Ross’ companies, Maize Asset Management, LLC (Maize Asset), along with Maize Capital and Ross, was charged with improper handling of customer funds. According to the complaint, Maize Capital and Ross provided pool participants and prospective participants with written documents that contained false and misleading statements in soliciting funds for and/or operating the pool. Specifically, the complaint charges that Maize Capital and Ross, from at least June 18, 2008 through at least January 14, 2009, misrepresented facts regarding the qualifications of investors who would participate in the commodity pool and the minimum amount that would be accepted for investment in the pool. Additionally, they allegedly misrepresented Maize Capital’s legal status as an “exempt” commodity pool operator under the CEA and the existence and identity of the pool’s administrator and auditor. The complaint also alleges that Maize Capital and Ross caused periodic account statements to be sent to various pool participants that misrepresented the profitability of their accounts. CFTC v. Ross, et al., No. 1:09-cv-05443 (N.D. Ill. filed Sept. 2, 2009).
  
  

Commodity Trading Advisors, Managed Accounts, and Trading Systems

• CFTC v. Zurich Futures & Options, Inc., et al.
  
  On January 15, 2008 the Commission filed a civil injunctive action against Diego Mariano Rolando of Buenos Aires, Argentina (a/k/a Roclerman and ROC d/b/a IA Trading.com, Inc. (IA Trading)), charging Rolando with defrauding hundreds of customers worldwide in a $43.8 million investment scheme. The complaint alleges that Rolando: 1) fraudulently traded customer funds in commodity futures and options contracts; 2) provided false account statements to customers; and 3) supplied false customer contact information to a U.S. clearing firm to hide his fraudulent scheme from customers. In all, the complaint alleges that Rolando solicited approximately $43.8 million from more than 400 customers in South America, Europe, and the United States. Specifically, the complaint alleges that Rolando utilized the Web sites http://www.IATrading.com and http://www.Roclerman.com to solicit customers to open trading accounts. He allegedly told customers that he would trade securities on their behalf, however he traded tens of millions of dollars in customer funds in commodity futures and options contracts, without customer knowledge or authorization to trade in the commodity markets. Indeed, according to the complaint, it appears that some customers signed and completed account documents which limited the defendant’s authority to trade securities. The complaint also charges that to further promote his scheme, Rolando allegedly provided false customer contact information and false trading advisor names to the U.S. clearing firm holding customers’ accounts and clearing trades to circumvent customer protection policies and programs. Rolando provided false contact information on as many as 200 of the 420 customer accounts. Finally, Rolando is charged with providing his customers with written materials containing misrepresentations and omissions of material fact regarding their investments and IA Trading’s role and business relationship with the U.S. clearing firm. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. CFTC v. Rolando, No. 3:08-cv-00064-MRK (D. Conn. filed Jan. 15, 2008).
• CFTC v. Guardian Futures, Inc., et al.
  
  On April 8, 2009, the Commission filed a civil injunctive action against Steven Leigh Shakespeare, and his company, Guardian Futures, Inc., charging them with fraud and unauthorized trading of customer accounts, resulting in combined customer trading losses of at least $196,000. Specifically, the complaint alleges that Shakespeare engaged in a series of unauthorized transactions and fraudulent acts in the accounts of Plains Grain Company, Inc. and Evans Grain Marketing LLC. The complaint charges that Shakespeare, throughout the course of the unauthorized transactions, made misrepresentations and omitted material facts to customers and to Alaron Trading Corporation, the FCM to whom Shakespeare had introduced the customer accounts. On the same day the complaint was filed, the court entered a statutory restraining order preserving books and records. The Commission received cooperation from the Office of the U.S. Attorney for the Western District of Texas in connection with this matter. CFTC v. Guardian Futures, Inc., et al., No. A09CA 260SS (W.D. Tex. filed April 8, 2009).
• CFTC v. Healy
  
  On July 12, 2009, the Commission filed a civil injunctive action against Sean Nathan Healy charging him with operating a fraudulent commodities scheme that defrauded at least 44 investors of approximately $14 million. The complaint alleges that Healy defrauded investors by falsely claiming that he would invest their funds to trade commodity futures and options contracts. The complaint further alleges that Healy repeatedly told an investor that Healy’s futures and options trading was earning excellent returns and that distributions of these tremendous trading profits would be made in February 2009. Contrary to Healy’s claims, he allegedly did not use investors’ funds to trade futures, options, or other instruments; rather, Healy misappropriated investors’ funds. For example, the complaint alleges that Healy and his wife, relief defendant Shalese Rania Healy, also of Weston, Florida, used investor money to purchase numerous luxury vehicles (including a Porsche, Lamborghini, and several Ferraris), approximately $1.4 million worth of jewelry, gold bullion, and a $2.4 million home. The misappropriated investor funds were also allegedly used to fund approximately $2 million in home improvements and furnishings, including a $500,000 home movie theater, and to lease 2,500 square feet of garage space to store the vehicles. The stolen investor funds also were allegedly used to lease a luxury suite at Miami’s BankAtlantic Arena. On July 13, 2009, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC and the U.S. Attorney’s Office for the Middle District of Pennsylvania in connection with this matter. CFTC v. Healy, No. 1:09-cv-01331-CCC (M.D. Penn. July 12, 2009).
  
  

Fraud By Futures Commission Merchants, Introducing Brokers and Their Associated Persons

• CFTC v. First Capitol Futures Group, et al.
  
  On June 26, 2009, the Commission filed a civil injunctive action against David Michael Kogan and his company, registered IB First Capital Futures Group a/k/a and d/b/a First Capital Group (First Capital), charging them with operating a fraudulent commodity scheme involving 58 customers and causing more than $3 million in customer losses. Specifically, the complaint alleges that the defendants fraudulently solicited members of the public to trade options on commodity futures contracts by misrepresenting and failing to disclose material facts concerning, among other things: 1) the likelihood that a customer would realize large profits from trading options; 2) the risk involved in trading options; 3) the existence of certain options positions in customer accounts; and 4) the dismal performance record of First Capital customers trading options. According to the complaint, Kogan and other First Capital brokers repeatedly told customers that they would make substantial amounts of money in a very short time by trading options, and routinely failed to disclose adequately the risk of loss inherent in trading options. Further, the complaint alleges that, despite mounting trading losses, Kogan, as well as other First Capital brokers, told customers that Kogan had “made millionaires out of several customers” and that many First Capital customers were making money. However, First Capital customers instead lost more than $3 million, of which more than $2.2 million was collected as commissions and fees. On June 30, 2009, the court entered a statutory restraining order freezing assets and preserving books and records. CFTC v. First Capitol Futures Group, et al., No. 09-0488-CV-W-DW (W.D. Mo. filed June 30, 2009).
  
  

Forex Fraud

• CFTC v. CRE Capital Corp., et al.
  
  On January 15, 2009, the Commission filed a civil injunctive action against James Ossie and his company CRE Capital Corporation (CRE) charging them with operating a Ponzi scheme involving more than 100 people and approximately $25 million in connection with forex transactions. Ossie is president and sole owner of CRE; neither has ever been registered with the CFTC. According to the CFTC’s complaint, Ossie and CRE promised pool participants that they would earn a 10 percent return on their money within 30 days by trading U.S. and Japanese currency pairs. The complaint further alleges that since June 18, 2008, rather than making money for pool participants, Ossie and CRE lost approximately $4.4 million trading forex. The Commission received cooperation from the SEC in connection with this matter. CFTC v. CRE Capital Corp., et al., No. 1 09-CV-0115 (N.D. Ga. Filed Jan. 15, 2009).
• CFTC v. Atwood & James, Ltd., et al.
  
  On January 22, 2009, the Commission filed a civil injunctive action against Atwood & James, Ltd. and Atwood & James, S.A., Inc. (collectively, Atwood), and individuals, Michael A. Kardonick and Gary R. Shapoff charging them with forex options fraud. The complaint alleges that defendants fraudulently soliciting more than $1 million from retail clients to trade forex options and misappropriated client funds. Specifically, the complaint alleges that, from at least 2001 to the date the complaint was filed, defendants fraudulently solicited funds from members of the general public worldwide, including the United States and the United Kingdom, to trade forex options. Through the Web site http://www.atwoodjames.com and other means, defendants allegedly made extraordinary and false claims regarding Atwood including that: profits are virtually guaranteed; Atwood is a sophisticated world-wide company with offices in New York, Amsterdam, London, and Rio de Janeiro; Atwood’s traders are licensed and regulated in the United States with their main corporate offices located in Rochester, New York; and Atwood and Kardonick have been successfully trading foreign currency options for the past 30 years. As alleged, Atwood and Kardonick are not successful traders. According to the complaint, the only known trading accounts are Kardonick’s personal trading accounts, which from 2003 through September 2008, sustained net losses of approximately $1.7 million trading commodity futures and options. According to the complaint, defendants do not operate out of Rochester, New York; rather, they operate out of Rio de Janeiro, Brazil. Moreover, defendants are not registered or licensed with any known financial regulatory authority. Kardonick and Shapoff also failed to disclose that they both have criminal convictions for mail and wire fraud and Shapoff, additionally, was the subject of two CFTC reparations actions involving misrepresentation, misuse of customer funds, nondisclosure, and order executions. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Comissão de Valores Mobiliarios and the British Financial Services Authority in connection with this matter. CFTC v. Atwood & James, Ltd., et al., No. 09 CV 6032 CJS (W.D.N.Y. filed Jan. 22, 2009).
• CFTC v. Billion Coupons, Inc., et al.
  
  On February 18, 2009, the Commission filed a civil injunctive action against Marvin Cooper and his company Billion Coupons, Inc. (BCI) charging them with operating a Ponzi scheme that involved more than 125 customers—all of whom are Deaf—in connection with commodity futures trading and forex trading. The CFTC alleges that since at least September 2007, Cooper and BCI solicited approximately $4.4 million from more than 125 Deaf American and Japanese individuals for the sole purported purpose of trading forex. Also, according to the complaint, while Cooper and BCI opened both forex and futures accounts with approximately $1.7 million of customer money, Cooper misappropriated more than $1.4 million of customer funds for personal use. Cooper allegedly used the misappropriated funds to purchase computer and electronic equipment, flying lessons, and a $1 million home. He also allegedly returned approximately $1.6 million to customers as purported “profits” and as commissions to employees and agents. Cooper and BCI allegedly lured in customers with promises of 15 to 25 percent monthly returns, depending on the amount and size of the customer’s investment, while representing that the investment would be low risk and that the promised return was produced by their successful trading. Finally, the complaint alleges that to conceal and perpetuate their fraud, Cooper and BCI provided customers with false account statements representing that their accounts were increasing by as much as 25 percent, when, in fact, the accounts were collectively losing money every month. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC and the State of Hawaii, Department of Commerce and Consumer Affairs, Office of the Commissioner of Securities in connection with this matter. CFTC v. Billion Coupons, Inc., et al., No. CV09-00069 JMS LEK (D. Haw. filed Feb. 18, 2009).
• CFTC v. Capital Blu Management, LLC, et al.
  
  On March 23, 2009, the Commission filed under seal a civil enforcement action against Donovan Davis, Jr. (D. Davis), Blayne Davis (B. Davis), Damien Bromfield, Capital Blu Management, LLC (Capital Blu), and DD International Holdings, LLC (DDIH) charging them with operating a fraudulent commodity scheme involving about 100 investors and approximately $17 million solicited purportedly to invest in forex futures and options. As alleged, defendants told prospective investors that their funds would be pooled in the CBM FX Fund, LP (FX Fund), a commodity pool established by Capital Blu. Rather than pool investor funds, the defendants split the funds into trading of both off-exchange and on-exchange forex futures and off-exchange forex options. In addition, the defendants allegedly deposited millions of dollars into multiple Capital Blu bank accounts, where funds were commingled and misappropriated for personal use, including luxury automobiles, private jet charters and, a two-night $40,000 spree at a “gentlemen’s club.” Ultimately, as alleged, of the $17 million solicited, $7 million was lost in trading, and millions of dollars remain unaccounted for. To hide their fraud, the complaint alleges, D. Davis, B. Davis, and Bromfield provided investors with phony account statements misrepresenting the earnings in their accounts by showing consistent monthly profits as high as seven percent for 12 straight months (September 2007 through August 2008). In fact, as alleged, defendants’ actual trading resulted in net losses every month. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the NFA and the State of Florida Office of Financial Regulation in Orlando, Florida in connection with this matter. CFTC v. Capital Blu Management, LLC, et al., No. 6:09-cv-00508-JA-DAB (M.D. Fla. filed March 23, 2009).
• CFTC v. CRW Management LP, et al.
  
  On March 4, 2009, the Commission filed a civil injunctive action against CRW Management, LP (CRW) and its president and general partner, Ray M. White and CRW, charging them with operating a Ponzi scheme involving the solicitation of at least $10.9 million from more than 250 investors to trade off-exchange forex. The CFTC alleges that, rather than invest the funds, White and CRW stole millions of dollars, using investor money to fund a drag racing team, purchase real estate and multiple cars, and to purchase Dallas Stars hockey season tickets. Specifically, the CFTC charges that, as early as November 2006, White and CRW told prospective investors that CRW would pool their funds and trade forex on their behalf, claiming that CRW would generate tremendous returns for investors of between five and eight percent weekly, or an annual return equivalent of between 260 and 416 percent. As alleged, White and CRW lied to investors when they stated that CRW had achieved such returns, that investing with CRW involved very little risk, and that investor money was safe. The CFTC lawsuit further alleges that White and CRW failed to disclose to investors that of the at least $10.9 million invested, at most only $94,000 was ever used to trade forex and most of that was lost. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Fort Worth Regional Office of the SEC in connection with this matter. CFTC v. CRW Management LP, et al., No. 3-09CV0408-L (N.D. Tex. filed March 4, 2009).
• CFTC v. Barki LLC, et al.
  
  On March 17, 2009, the Commission filed a civil enforcement action against Barki, LLC and Bruce C. Kramer charging them with fraudulently soliciting, since at least June 2004 through February 2009, at least $40 million from at least 70 customers to trade leveraged forex contracts, misappropriating at least $30 million of customer funds to pay purported profits, return principal to customers, and for personal expenses, including the purchase of a horse farm for more than $1 million, a Maserati sports car and other luxury cars, artwork, and extravagant parties. Defendants claimed success in trading forex, promised little risk using Kramer’s trading system, and lured customers with promises of monthly returns of at least three percent to four percent. The defendants concealed their fraud and trading losses through false account statements for over five years. Defendants also created fictitious trading records showing that the trading account held approximately $59 million. In fact, the accounts held $1 million or less, and, as of the date the complaint was filed, only $575,000 remained in trading accounts. Defendants’ fraud became known to customers on or around February 25, 2009, when Bruce Kramer committed suicide. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the FBI, Charlotte Division, and the NFA in connection with this matter. CFTC v. Barki LLC, et al., No. 3:09-cv-00106-GCM (W.D.N.C. filed March 17, 2009).
• CFTC v. PrivateFX Global One Ltd., SA
  
  On May 21, 2009, the Commission filed a civil injunctive action against Robert D. Watson, Daniel J. Petroski, PrivateFX Global One Ltd., SA (Global One), and 36 Holdings Ltd. charging them with orchestrating a multi-million dollar fraudulent off-exchange forex scheme that, beginning in 2006, solicited approximately $19.5 million from approximately 60 investors. The complaint alleges that to entice investors to purchase shares in Global One, defendants touted their supposedly extremely successful historical performance of forex trading. Defendants claimed forex trading returns that ranged from approximately six percent to 10 percent quarterly from January 1, 2000 through June 30, 2006, without ever having a losing quarter. Further, the complaint alleges that defendants reported returns, purportedly generated almost exclusively through forex trading, to Global One investors of approximately 1.5 percent to three percent each month. In fact, Defendants claimed in monthly individual investor reports, Global One’s financial statements, and on Global One’s Web site, among other places that almost all of their individual forex trades since January 1, 2008, resulted in a profit. The complaint further alleges that to conceal their fraud from the CFTC, Defendants provided the CFTC with falsified account statements showing supposed profitable forex trades at an international brokerage house from January 1, 2009 to April 30, 2009, which purportedly included over $2 million in allocated profits for Global One. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the Fort Worth Regional Office of the SEC in connection with this matter. CFTC v. PrivateFX Global One Ltd., SA, No. 09-1540 (S.D. Tex. filed May 21, 2009).
• CFTC v. Riolo, et al.
  
  On May 21, 2009, the Commission filed a civil injunctive action against Michael J. Riolo and two companies he controls and owns, LaSalle International Clearing Corporation and Sterling Wentworth Currency Group, Inc., charging them with fraudulently soliciting and receiving funds from members of the general public in an off-exchange forex scam and providing their customers with false account statements. Specifically, the complaint alleges that the defendants, from at least June 18, 2008, failed to disclose to customers that they were the counterparties in each forex transaction entered on behalf of their customers, that they owed millions of dollars to customers, and that they lacked the funds to make these payments as well as any payments for prospective profits. The complaint also alleges that the defendants sent monthly statements to customers depicting the month-end value for each customer’s account, without disclosing to customers that defendants lacked sufficient cash to pay to customers the purported value of their accounts. The complaint further alleges that these account statements were false since the defendants expressly overstated the total cash available, in some instances by as much as $24.5 million. The Commission received cooperation from the FBI, the U.S. Attorney’s Office for the Southern District of Florida, and the State of Florida Office of Financial Regulation in connection with this matter. CFTC v. Riolo, et al., No. 09-80765 (S.D. Fla. filed May 21, 2009).
• CFTC v. SNC Asset Management, Inc., et al.
  
  On June 9, 2009, the CFTC filed a civil injunctive action against SNC Asset Management, Inc., SNC Investments, Inc. (SNC Investments), Chief Executive Officer Peter Son and Chief Financial Officer Jin K. Chung charging them with operating an $85 million fraudulent forex scam involving approximately 500 customers. The complaint alleges that, since at least 2000, defendants: 1) fraudulently solicited members of the Korean community of the San Francisco Bay area, where defendants Son and Chung lived; 2) misappropriated customer funds to pay off other customers and to pay personal and business expenses; and 3) issued false statements to customers to conceal their misappropriation and lack of trading. As alleged, defendants abruptly closed operations, and Son and Chung disappeared. Defendants falsely claimed to be successful forex traders, touting a purported track record of 50 percent annual returns and guaranteeing monthly returns of two percent to three percent. Solicitation materials boasted that SNC was a leading forex firm in the industry. Each month, defendants allegedly provided account statements showing the promised steady returns, and they continued to solicit new funds. Defendants, however, appeared to have engaged in little trading on behalf of customers. What little trading they actually did was unprofitable. The complaint also charges SNC Investments, a FCM registered with the CFTC, with violating minimum net capital requirements and withholding notice of its undercapitalization. On June 10, 2009, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the SEC, FBI, U.S. Attorney’s Office for the Northern District of California, NFA, Danish Financial Supervisory Authority (Finanstilsynet), and the Swedish Financial Supervisory Authority (Finansinspektionen) in connection with this matter. CFTC v. SNC Asset Management, Inc., et al., No. 09-2555PJH (N.D. Cal. filed June 9, 2009).
• CFTC v. WeCorp, Inc., et al.
  
  On April 9, 2009, the Commission filed a civil injunctive action charging WeCorp, Inc. (WeCorp), its President and CEO, Stuart W. Jones, and its Senior Vice President and Trading Consultant, Payton Lowe, charging them with fraudulently soliciting approximately $1.5 million from more than 20 people to trade off-exchange forex, but instead used the money to lease a lavish Honolulu home, luxurious cars, and other purchases. The complaint alleges that, since June 2008, Jones, Lowe, and WeCorp claimed to be experienced forex traders and promised to trade customer funds using an automated forex trading system that purportedly guaranteed monthly 100 percent returns with no risk of loss. In reality, the lawsuit alleges, Jones, Lowe, and WeCorp had no automated trading system, virtually no experience in trading forex, lost money trading, and stole investor funds for personal gain. The lawsuit further alleges that Jones, Lowe, and WeCorp provided investors with false statements showing consistent monthly profits when, in fact, nearly all customer funds had either been stolen by the defendants or lost in forex trading. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the State of Hawaii, Department of Commerce and Consumer Affairs, Office of the Commissioner of Securities and the Hilo Police Department in connection with this matter. CFTC v. WeCorp, Inc., et al., No. CV09-00153 (D. Haw. filed April 7, 2009).
• CFTC v. Gresham
  
  On July 2, 2009, the Commission filed a civil injunctive action against Eldon A. Gresham, d/b/a The Gresham Company charging him with operating a multi-million dollar forex Ponzi scheme, specifically targeting persons of the Christian faith to invest in the scheme. The complaint alleges that, from at least January 2004, Gresham solicited more than $15 million from more than 75 customers to trade off-exchange forex contracts. Gresham allegedly claimed to prospective customers that he was successful trading forex because the “Lord had blessed him.” According to the complaint, Gresham lost money in the limited forex trading in which he engaged, and any purported profits paid to his customers came from either existing Gresham customers’ original investments or money invested by subsequent Gresham customers. Specifically, the complaint alleges that, at most, slightly over $2 million of the more than $15 million that Gresham solicited from customers was deposited into Gresham’s forex trading accounts. Of this slightly over $2 million amount, more than $1.4 million was withdrawn by Gresham. At least $14.4 million, therefore, was either misappropriated by Gresham or returned to his customers as part of the Ponzi scheme. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the U.S. Postal Inspection Service, Fort Worth Division, and the U.S. Attorney’s Office for the Northern District of Georgia in connection with this matter. CFTC v. Gresham, No. 3:09-CV-75-JTC (N.D. Ga. filed July 2, 2009).
• CFTC v. Queen Shoals, LLC, et al.
  
  On August 4, 2009, the Commission filed a civil injunctive action against Sidney S. Hanson, Charlotte M. Hanson and their companies, Queen Shoals, LLC; Queen Shoals II, LLC; and Select Fund, LLC, charging them with operating a Ponzi scheme from at least June 18, 2009 involving more than $22 million in connection with off-exchange forex futures trading. Specifically, the complaint alleges that in both their personal and Web site solicitations, the defendants falsely claimed success in trading forex, guaranteed customers profits through the use of silver and gold bullion-backed “non-depletion accounts” (which defendants’ claimed guarantees that the customer will receive the return of invested principal and the promised “interest”) and represented that there would be no risk to customers’ principal investment. The complaint also alleges that the defendants lured prospective customers with promises of returns of eight percent to 24 percent through customers investing via promissory notes for terms of one to five years; customers who committed to the longest monthly terms were promised the greatest “profits.” In reality, the complaint alleges, the defendants deposited little or no customer funds into forex trading accounts. Rather, the defendants misappropriated customer funds to finance the Hansons’ personal expenses, including the purchase of an 88-acre farm, private plane rentals and luxury vacations. On the August 7, 2009, the court entered: a statutory restraining order freezing assets and preserving books and records; and a consent order of permanent injunction that imposed a permanent injunction against further violations, as charged, permanent trading and registration bans, and an order that the defendants pay restitution, disgorgement and civil monetary penalties in amounts to be determined by the court at a later date. The Commission received cooperation from the State of North Carolina Department of the Secretary of State, Securities Division; FBI; and the Office of the U.S. Attorney, Western District of North Carolina in connection with this matter. CFTC v. Queen Shoals, LLC, et al., No. 3:09-cv-335 (W.D.N.C. filed Aug. 4, 2009).
• CFTC, et al. v. MAK 1 Enterprises Group, LLC, et al.
  
  On August 17, 2009, the Commission and the Commissioner of Corporations for the State of California filed a civil injunctive action against MAK 1 Enterprises Group, LLC, (MAK 1) and its Chief Executive Officer, Mohit A. Khanna (Khanna), charging them with fraudulently soliciting at least $16.4 million from at least 122 individuals purportedly to trade forex on their behalf, misusing client funds to pay off other clients (i.e., operating a Ponzi scheme) and for personal use, and issuing false statements to conceal their fraud as they continued to solicit funds. Specifically, the complaint charges that defendants fraudulently solicited funds from individuals located primarily in southern California by: 1) guaranteeing returns of 40 percent to 50 percent; 2) reassuring clients that investments with MAK 1 were protected against loss by MAK 1 insurance policies; 3) claiming to have $50 million in assets and at other times $500 million or more in assets; 4) claiming to be experienced traders with a consistent six-year track record of double-digit returns; 5) failing to adequately disclose the risks of trading off-exchange leveraged foreign currency contracts; and 6) failing to disclose that, in 2004, Khanna was barred from associating with any member of National Association of Securities Dealers, now known as the Financial Industry Regulatory Authority, for allegedly luring investments from clients through alleged false misrepresentations. Defendants have not met redemption requests or returned funds to many MAK 1 clients. In late February, 2009, Khanna tried to reassure clients by claiming that MAK 1 has prospered for six years despite the negative market conditions. Khanna provided a letter from a purported accountant for MAK 1 stating that MAK 1 records show $50 million in assets. At that time, MAK 1 bank accounts had less than $200,000. On the day after the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the State of California, Department of Corporations and the SEC in connection with this matter. CFTC v. MAK 1 Enterprises Group, LLC, et al., No. 09-CV-1783 BEN (POR) (S.D. Cal. filed Aug. 17, 2009).
• CFTC v. Diamond, et al.
  
  On September 3, 2009, the Commission filed a civil injunctive action against Beau Diamond (Diamond) and his company, Diamond Ventures LLC (DVL) charging them with misappropriation and fraud in operating a forex Ponzi scheme in which they allegedly solicited approximately $37 million from at least 200 investors. According to the complaint, the defendants falsely guaranteed the return of investors’ principal and monthly returns ranging from 2.75 percent to five percent, purportedly paid from the defendants’ successful forex trading. In reality, the defendants lost $13.3 million trading forex. To conceal and perpetuate their alleged fraud, the defendants provided customers with false account statements misrepresenting that their accounts were increasing as promised, although the accounts were actually incurring substantial losses. The complaint further alleges that the defendants misappropriated at least $850,000 of customer funds and used the money for gambling and luxury purchases, including jewelry, air fares and hotel accommodations. On September 22, 2009, the court entered an order of preliminary injunction that continues the court’s September 3, 2009, asset freeze against Diamond and DV and prohibits them from further violations, as charged. In this matter, the Commission received cooperation from the FBI and the U.S. Attorney’s Office for the Middle District of Florida, which filed a criminal complaint against Diamond. On September 2, 2009, Diamond was arrested in Florida by Federal authorities in connection with the related criminal complaint. On September 10, 2009, a Federal magistrate judge issued an order denying Diamond’s request for bond and ordered him detained. CFTC v. Diamond, et al., No. 8:09-cv-01811-EAK-AEP (M.D. Fla. filed Sept. 3, 2009).
• CFTC v. CapitalStreet Financial, LLC
  
  On September 9, 2009, the Commission filed a civil injunctive action against CapitalStreet Financial LLC (CSF) and Sean F. Mescall, charging them with operating a Ponzi scheme involving the fraudulent solicitation of at least $1.3 million from at least 69 customers in connection with forex trading. Defendants are also charged with misappropriating approximately $875,000 of customer funds. Specifically, the complaint charges that, since at least September 2006, defendants fraudulently operated a forex trading scheme, luring customers to trade managed or pooled forex accounts by claiming forex trading success and promising quick and large returns, such as 60 percent to 80 percent annually. Defendants created the false impression that CSF was a well-established forex firm, in operation since 1999 with more than 35 offices in New York and North Carolina. In reality, defendants were not successful forex traders, sustained about $275,000 in trading losses, and opened CSF in or around August 2006 with four offices in the Charlotte area. Defendants provided customers with false monthly statements to conceal trading losses and their misuse of customer funds. On the same day the complaint was filed, in a related action, the Securities Division of the Office of the North Carolina Secretary of State arrested Mescall and executed search warrants at CSF and his home. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the North Carolina Secretary of State in connection with this matter. CFTC v. CapitalStreet Financial, LLC, No. 3:09-CV-387-RJC-DCK (W.D.N.C. filed Sept. 9, 2009).
• CFTC v. M25 Investments, Inc., et al.
  
  On September 29, 2009, the Commission filed a civil injunctive action against M25 Investments, Inc., M37 Investments, LLC, Scott P. Kear, Sr., Jeffrey L. Lyon, and David G. Seaman, charging them with fraudulently soliciting at least $8 million from approximately 224 customers in connection with the trading of forex, forex options, and commodity futures contracts. Many of the defendants’ customers were elderly and knew each other through churches in West Virginia, Mississippi, Texas, Maryland and other states, according to the complaint. The complaint further alleges that defendants fraudulently guaranteed monthly returns of two percent and annual returns of 24 percent and falsely claimed to be successful forex traders. Defendants did not disclose to prospective and existing customers that a significant portion of their funds would not be used for trading. The defendants also did not disclose that as of at least March 31, 2009, they did not have sufficient assets to pay the promised monthly profits or return principal. The complaint also alleges that the defendants overall lost funds trading forex, forex options and commodity futures and subsequently concealed their trading losses, lack of trading and other uses of customer funds by sending monthly statements to their customers that falsely assured customers that they were earning two percent every month. On the same day the complaint was filed, the court entered a statutory restraining order freezing assets and preserving books and records. The Commission received cooperation from the U.S. Attorney for the Northern District of Texas and the NFA in connection with this matter. CFTC v. M25 Investments, Inc., et al., No. 3-09CV1831-M (N.D. Tex. filed Sept. 29, 2009).
  
  

Statutory Disqualification

• In re Sklena
  
  On August 7, 2009, the Commission issued a Notice of Intent to Suspend or Modify Registration against registered floor broker David G. Sklena. The action is based upon a criminal indictment issued against Sklena in March 2009 by the U.S. Attorney for the Northern District of Illinois. According to the Notice, the indictment charges Sklena with 11 Federal felonies, including commodity fraud, noncompetitive futures contract trading and wire fraud. The Notice states that, because the indictment charges Sklena with violations of Federal law that would reflect on the honesty or the fitness of Sklena to be a fiduciary, Sklena’s continued registration may pose a threat to the public interest or may threaten to impair public confidence in markets regulated by the Commission. Sklena is also a defendant in a Commission civil injunctive action filed in January 2008 that alleges Sklena willfully aided and abetted illegal trade practices in the CBOT Five-Year Treasury Note futures pit (see CFTC v. Sarvey, et al., No. 08C0192 (N.D. Ill. filed Jan. 9, 2008). In re Sklena, CFTC Docket No. SD 09-01 (CFTC Aug. 7, 2009).
• In re Linuxor Asset Mgt. LLC, et al.
  
  On September 1, 2009, the Commission issued a Notice of Intent to Revoke Registrations against registered, Linuxor Asset Management LLC’s (LAM[“s]) CPO registration, Linuxor Capital Management LLC’s (LCM[‘s]) CTA registration, and Abbas A. Shah’s registration as an AP of LAM. The Notice alleges that Shah and LAM are subject to disqualification from registration based on a consent order of permanent injunction against them that resolved the Commission’s commodity pool fraud charges. CFTC v. Shah, et al., No. 05-CV-8091 (LAK) (S.D.N.Y. Dec. 17, 2008). The Notice also alleges that LCM is statutorily disqualified from registration because Shah is the principal and part-owner of LCM and Shah is disqualified from registration. In re Linuxor Asset Mgt. LLC, et al., CFTC Docket No. SD 09-02 (CFTC filed Sept. 1, 2009).

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