Release Number 8445-21
CFTC Charges Two Men and Their Companies with Commodity Pool Fraud, Other Violations
October 08, 2021
Washington, D.C. — The Commodity Futures Trading Commission today announced the filing of a civil enforcement action in the U.S. District Court for the District of Arizona, charging defendants Purvesh Mankad and his affiliated entities CTAX Series, LLC, a CFTC-registered commodity pool operator, and CTAX Partners, LLC, a CFTC-registered introducing broker, with fraudulent solicitation, misappropriation of pool participant funds, and making false statements to the National Futures Association (NFA) regarding the fraud.
The CFTC today also issued an order simultaneously filing and settling charges against Paul Ohanian, an SEC-registered investment advisor based in Scottsdale, Arizona, and his advisory firm Scottsdale Wealth Planning, Inc., for intentionally or recklessly omitting material facts from communications with their clients who were pool participants contributing funds to the CTAX pool and for failing to register with the CFTC as commodity trading advisors (CTAs).
Mankad, CTAX Series, and CTAX Partners
The defendants were charged in connection with the CTAX Series 1, LLC commodity pool (CTAX Pool). Mankad and CTAX Series are also charged with making false statements relating to the fraud to the NFA. The CFTC seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
As alleged in the complaint, during the relevant period from approximately July 25, 2014 to approximately March 22, 2019, Mankad and CTAX Series (1) represented to pool participants that only experienced CTAs would trade funds in the CTAX Pool, when in reality Mankad, who was not a CTA and had limited, unsuccessful experience trading futures, engaged in much and eventually all trading in the CTAX Pool; (2) misrepresented and omitted material facts regarding brokerage commissions that would be charged to the CTAX Pool, when in fact Mankad and CTAX Partners misappropriated pool funds by extracting excessive commissions triggered by Mankad’s own unauthorized trading; (3) beginning in July 2018, recklessly traded the CTAX Pool’s assets in a manner that resulted in a loss of approximately 89 percent of the CTAX Pool’s assets, resulting in significant losses to pool participants; (4) concealed those losses from pool participants by intentionally delaying the provision of monthly account statements to pool participants; and (5) falsified emails submitted to the NFA in connection with an NFA audit of CTAX Series and CTAX Partners to make it appear that defendants provided timely account statements to all pool participants. As a result of this conduct, pool participants lost more than $1.9 million, according to the complaint.
Ohanian and Scottsdale Wealth
The order requires Ohanian and Scottsdale Wealth to pay $338,000 in restitution and a $169,000 civil monetary penalty, requires both to cease and desist from any further violations of the CEA or CFTC regulations, as charged, and prohibits both from trading in commodity interests, registering with the CFTC, or engaging in activity requiring such registration for four years.
Separately, the order finds that, during the relevant period, Ohanian and Scottsdale Wealth intentionally or recklessly omitted material facts from communications with pool participants, including (1) the full extent of Ohanian’s relationship with and compensation from Mankad, CTAX Partners, CTAX Series, and another entity Mankad owned; (2) Ohanian’s concerns regarding the fees associated with the CTAX Pool; (3) Ohanian’s concerns regarding Mankad’s reckless trading; and (4) details relating to the CTAX Pool’s near-total loss in value beginning in July 2018. Ohanian and Scottsdale Wealth also failed to register as CTAs, which was required given their business of advising pool participants regarding the advisability of trading in futures.
The CFTC thanks the U.S. Securities and Exchange Commission and the NFA for their assistance in connection with this matter.
The Division of Enforcement staff members responsible for this case are Anthony Biagioli, Lauren Fulks, Tom Simek, Christopher Reed, and Charles Marvine.
CFTC’s Commodity Pool Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud involving individuals and firms, often unregistered, offering investments in commodity pools.
The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.