Release Number 8663-23

CFTC Charges Unregistered Commodity Trading Advisor with Fraud, Misappropriation, and Unregistered Commodity Pool Operator with Misappropriation

February 22, 2023

Washington, D.C.  The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the District of Minnesota against Richard “Rick” Miller and his company, Flip 2 Futures Trading Company LLC (F2F) of Otsego, Minnesota, charging Miller and F2F with fraud, misappropriation, and unregistered activity related to trading on behalf of a commodity pool run by Justin Dendinger and Punch Drunk Marketing LLC (PDM) of Somerset, Wisconsin.

In its continuing litigation, the CFTC seeks full restitution, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.

Case Background

According to the complaint, Dendinger and PDM pooled investor funds in accounts in their names and transferred the funds to F2F and Miller for trading. As alleged in the complaint, from approximately July 2019 through November 2020, F2F acted as an unregistered commodity trading advisory (CTA) by soliciting funds from and engaging in discretionary trading on behalf of PDM. Miller acted as an unregistered associated person (AP) of F2F. 

F2F and Miller are also charged with illegally collecting funds from the pooled investment vehicle in F2F’s or Miller’s bank and trading accounts, failing to provide a required disclosure document to PDM, and failing to maintain required records. In soliciting funds for and operating the pooled investment vehicle, PDM acted as an unregistered commodity pool operator (CPO) and Dendinger acted as an unregistered AP of PDM. PDM and Dendinger are also charged with illegally commingling pool participant funds with the funds of PDM and Dendinger and failing to provide pool participants with required disclosure documents. Dendinger, individually, is charged with making false or misleading statements of a material fact to the CFTC.

The CFTC alleges Miller made material misrepresentations about Miller’s futures trading performance and having other assets under management to persuade PDM and Dendinger to transfer funds to F2F and Miller for the purpose of trading futures contracts. In fact, according to the complaint, Miller did not trade as successfully as he claimed and did not have millions under management. Moreover, the complaint alleges F2F and Miller misappropriated some of PDM’s funds by failing to transfer all of PDM’s funds to Miller’s trading account and failing to transfer to PDM funds withdrawn from Miller’s trading account. 

The CFTC complaint further alleges PDM and Dendinger solicited and accepted $400,000 from nine pool participants residing in Minnesota and Wisconsin. The complaint also alleges PDM and Dendinger misappropriated pool participants’ investment funds by failing to transfer all funds provided to PDM by pool participants for the purpose of futures trading to F2F and Miller for trading as provided in PDM’s agreements with pool participants and by failing to return to pool participants funds repaid by F2F.

Finally, the complaint alleges that in response to a records subpoena and in response to a CFTC staff letter, Dendinger, via his attorney, falsely stated he had no trading accounts in his name with a registered futures commission merchant and had not engaged in any trading of specified financial products.

The Division of Enforcement staff members responsible for this action are Dmitriy Vilenskiy, Julia Colarusso, Christine Ryall, and Paul Hayeck. 

CFTC’s Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which provides information 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 Commission before investing funds.  If an entity is 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) or file a tip or complaint online or contact the CFTC Whistleblower Office.  Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected, paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.