Release Number 8697-23
CFTC Charges Commodity Trading Advisor, Commodity Pool Operator and Its Owner with Fraudulently Allocating Trades
Court Issues Restraining Order to Protect Assets and Documents
April 28, 2023
Washington, D.C. — The Commodity Futures Trading Commission today announced it filed a complaint in the U.S. District Court for the Southern District of Florida against Systematic Alpha Management, LLC (SAM), a registered commodity trading advisor (CTA) and commodity pool operator (CPO), and Peter Kambolin, its owner and registered associated person, of Sunny Isles Beach, Florida.
The complaint charges SAM and Kambolin with unfairly allocating trades between certain commodity pools and managed account customers and certain of their proprietary accounts. They are also charged with making misrepresentations to pool participants and managed account customers and violating CFTC regulations governing the allocation of trades. SAM and Kambolin defrauded pool participants and managed account customers and generated at least $1,451,559 in total trading profits for their proprietary accounts.
The CFTC seeks monetary penalties, disgorgement, restitution, registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations, as charged.
“As alleged, the defendants promised customers investment opportunities would be allocated fairly and equitably among customer accounts and proprietary accounts. In reality, the defendants took most of the profits and gave the losses to their customers,” said Director of Enforcement Ian McGinley. “The CFTC will aggressively pursue advisors and intermediaries who defraud their customers for their own personal gain, no matter what form it takes. This action further demonstrates the CFTC’s effective data analysis capabilities to proactively identify and prosecute misconduct,” McGinley continued.
CFTC Obtains Statutory Restraining Order
On April 24, U.S. District Judge Robert N. Scola, Jr. entered a statutory restraining order against the defendants, freezing their assets and giving the CFTC immediate access to their books and records. In addition, the court scheduled a preliminary injunction hearing for May 8.
As alleged in the complaint, Kambolin proclaimed SAM as a CTA and CPO that offered customers automatic, algorithm-based trading strategies involving futures, which customers could participate in either through commodity pools or managed accounts SAM traded. Between January 2019 and November 2021, the defendants operated at least two commodity pools, one they claimed focused on trading various exchange-listed cryptocurrency futures contracts and another they claimed focused on trading various exchange-listed foreign exchange (FX) futures contracts. The defendants also traded for at least four individual managed accounts. The defendants often executed trades for these commodity pools and managed accounts together with trades they executed on behalf of their proprietary accounts, and then allocated the trades among all of the accounts at the end of each trading day.
As further alleged in the complaint, between January 2019 and November 2021, the defendants unfairly and inequitably allocated trades between the commodity pools and managed accounts and their proprietary accounts. The defendants consistently allocated trades they knew were profitable to their proprietary accounts, while allocating unprofitable or less profitable trades to the commodity pools and managed accounts. By trading in this manner, the defendants defrauded pool participants and managed account customers, caused the commodity pools and managed accounts to incur net trading losses of more than $1.5 million, and generated more than $1.4 million in profits for their proprietary accounts.
In addition, according to the complaint, the defendants misrepresented to pool participants and to some managed account customers that they would allocate trades fairly and equitably among all the accounts the defendants traded for, and they misrepresented that the cryptocurrency futures pool and the FX futures pool would primarily trade cryptocurrency futures and FX futures, respectively. The complaint also alleges the defendants violated the CFTC regulations that require allocations of trades for multiple customer accounts be fair and equitable.
The Division of Enforcement staff responsible for this matter are Lauren Fulks, Elsie Robinson, Rebecca Jelinek, Thomas Simek, Benjamin Jackman, Jordon Grimm, Christopher Reed, and Charles Marvine, as well as former staff member Clemon Ashley.