Release Number 6299-12

July 9, 2012

Federal Court in Texas Orders Robert Mihailovich, Sr. and Growth Capital Management LLC to Pay over $9.3 Million in CFTC Anti-fraud Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained an order of permanent injunction against defendants Robert Mihailovich, Sr. (Mihailovich, Sr.) of Rockwall, Texas, and Growth Capital Management LLC (GCM) requiring Mihailovich, Sr. and GCM to make restitution to defrauded customers, disgorge ill-gotten gains, and pay a civil monetary penalty together, totaling over $9.3 million for fraudulently soliciting over $30 million from customers to trade commodity futures contracts and foreign currency (forex). The order also imposes permanent trading and registration bans against the defendants.

The court’s order, entered on June 26, 2012, arises out of a CFTC complaint filed on July 27, 2010, against Mihailovich, Sr., GCM, and Robert Mihailovich, Jr. (Mihailovich, Jr.), Mihailovich, Sr.’s son. As alleged in the complaint, Mihailovich, Sr. was convicted and incarcerated on federal wire fraud charges, served 27 months, and while on a three-year supervised release, fraudulently solicited and accepted more than $30 million from approximately 93 customers to open managed trading accounts. The complaint also alleged that Mihailovich, Jr., at the time of GCM’s initial registration, failed to disclose Mihailovich, Sr.’s involvement with GCM, and failed to disclose in CFTC registration filings that his father was a controlling principal of GCM. (See CFTC Press Release 5863-10, July 28, 2010.)

Previously, the federal court had entered an order of default judgment against GCM on March 15, 2011. The federal court later also entered an order of default judgment against Mihailovich, Sr. on November 22, 2011, as a sanction for discovery violations.

The federal court’s June 26, 2012, order finds that during discovery Mihailovich, Sr. engaged in a pattern of willfulness and bad faith. Mihailovich, Sr. failed to attend a number of court-ordered hearings, repeatedly failed to abide by court orders, failed to communicate with plaintiff CFTC, failed to appear or respond to his scheduled deposition, and failed to respond to written discovery requests, according to the order.

The June 26, 2012 order imposes sanctions against Mihailovich, Sr. and GCM arising out of the prior default judgments against them. The order requires Mihailovich, Sr. and GCM jointly and severally to pay $3,475,112 in restitution, to disgorge $389,006 in ill-gotten gains, and to pay a civil monetary penalty of $5,440,000. The order also permanently prohibits the defendants from violating the Commodity Exchange Act and CFTC regulations, as charged, and from engaging in certain commodity-related activities, including personal trading and applying for registration or claiming exemption from registration with the CFTC.

The CFTC previously obtained a consent order against Mihailovich, Jr., that imposed a $40,000 civil monetary penalty and banned him from seeking registration with the CFTC for 10 years and from engaging in certain commodity-related activities, including trading, for 5 years (see CFTC Press Release 5679-12, June 13, 2012).

The CFTC thanks the U.S. Attorney’s Office for the Northern District of Texas, the Securities and Exchange Commission’s Fort Worth Regional Office, and the National Futures Association for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Alison B. Wilson, Boaz Green, Stephen T. Tsai, Maura M. Viehmeyer, Philip Tumminio, Michelle Bougas, Anne Termine, Gretchen L. Lowe, and Vincent A. McGonagle.

Media Contact
Dennis Holden

Last Updated: July 9, 2012