January 10, 2020

CFTC Obtains $2.5 Million Judgment for Fraudulent Solicitation and Misappropriation of Funds From Commodity Pool Participants

Washington, DC – The U.S. Commodity Futures Trading Commission today announced the U.S. District Court for the Northern District of Illinois entered a Consent Order for Permanent Injunction on January 8th against defendant Richard D. Carter of Illinois in connection with a $1.76 million commodity pool fraud operated by Blue Guru, LLC.  

The order requires Carter to pay restitution totaling $838,642 and a civil monetary penalty of $1,760,022. The order also imposes permanent trading and registration bans on Carter and prohibits him from violating provisions of the Commodity Exchange Act as charged. The order stems from a CFTC Complaint filed on January 12, 2018 [CFTC Press Release 7672-18], which charged Carter, co-defendant Mark R. Slobodnik, and Blue Guru, LLC with fraud, misappropriation, and failing to register with the CFTC. 

The order finds that from April 2014 to January 2018, Carter willfully misrepresented material facts to Blue Guru pool participants and prospective pool participants concerning the profitability of their participation interests in the commodity pool. Among other misrepresentations, Carter stated that pool funds would be used to trade futures, including the Dow Jones E-mini and the S&P 500 E-mini contracts on the CME, when, in fact, defendants used less than two-thirds of the $1.76 million they received for trading. According to the order, Carter informed prospective participants that they would earn 8% per year on their investment plus 50% of any gross net trading profits, and he issued false account statements reflecting illusory quarterly gains. In reality, Blue Guru incurred more than $500,000 in trading losses, half of which Carter directly caused.

The order also finds that Carter misappropriated $586,674 of participants’ funds, ignored withdrawal requests, and lied about conditions that purportedly prevented defendants from making disbursements.

On November 13, 2018, the court entered a consent order of permanent injunction against defendant Slobodnik, requiring him to pay restitution of $280,000, disgorgement of $45,342, and a civil monetary penalty of $45,342. On May 1, 2018, a default judgment was entered against defendant Blue Guru, ordering it to pay restitution of $1,400,076, disgorgement of $1,400,076, and a civil monetary penalty of $4,200,230. 

On August 27, 2019, Carter pleaded guilty to wire fraud in a related criminal proceeding and is scheduled to be sentenced on February 13, 2020.  United States v. Carter, Case No. 1:18-cr-00154 (N.D. Ill. filed May 10, 2018).

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure that wrongdoers are held accountable.

The CFTC thanks the U.S. Attorney’s Office for the Northern District of Illinois and the Federal Bureau of Investigation for their assistance.

The Division of Enforcement staff members responsible for this action are Susan Gradman, Joseph Patrick, Brigitte Weyls and, Scott Williamson.

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CFTC’s Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.

-CFTC-