Release Number 8559-22
CFTC Orders Powerline Petroleum, LLC to Pay $875,000 For Fraud, False Statements to CME, and Failure to Register as a Commodity Trading Advisor
Co-Founder and Owners Also Charged
July 19, 2022
Washington, D.C. — The Commodity Futures Trading Commission today issued an order filing and simultaneously settling charges against Powerline Petroleum, LLC (Powerline), its co-founder and owner, Darren Dohme, and other owner, Adam Wright, for misleading clients regarding the nature of Powerline’s role, and financial interest in the clients’ transactions, and for making false statements to the Chicago Mercantile Exchange (CME), a board of trade and designated contract market. Powerline and Dohme are also charged with failing to register Powerline as a Commodity Trading Advisor (CTA) and for failure to make required disclosures.
The order imposes a $375,000 civil monetary penalty and $500,000 in disgorgement, with Dohme and Wright’s monetary obligation capped at $150,000 each. The order also imposes six-month trading and three-month registration bans on Powerline, Dohme, and Wright.
“We are committed to ensuring that market participants are honestly served by intermediaries and advisors, and that those intermediaries and advisors provide all the transparency that our statutes and regulations require,” said CFTC Acting Director of Enforcement Gretchen Lowe. “Further, as this case shows, we will not tolerate false and misleading statements being made to our exchanges.”
The order finds that Powerline, Dohme, and Wright defrauded clients by failing to adequately disclose that Powerline acted as the counterparty to its clients’ transactions—not merely as a broker. The order also finds that Powerline, Dohme, and Wright failed to disclose that Powerline charged clients a markup over the cost at which Powerline was able to acquire the fuel hedging strategies in the market. These failures also violated Powerline’s obligation to disclose to clients all fees and conflicts of interest. In addition, the order finds Dohme liable as a controlling person for Powerline’s violations.
Moreover, according to the order, Dohme and Wright produced a backdated letter to CME, to give CME the false impression that a certain disclosure was made to clients before it actually had been.
The order also finds that Powerline acted as a CTA by offering clients fuel hedging strategies, but failed to register as such.
The CFTC’s investigation was conducted in conjunction with a parallel inquiry by the CME Group, which also issued a Notice of Disciplinary Action today where Powerline agreed to pay a $225,000 fine and to disgorge profits.
The CFTC appreciates the cooperation and assistance of the CME Group.
Division of Enforcement staff members responsible for this case are Sam Wasserman, Trevor Kokal, R. Stephen Painter, Jr., Lenel Hickson, Jr., and Manal M. Sultan.