Release Number 8768-23
CFTC Charges Texas Man and His Company with Fraud and Misappropriation
August 23, 2023
Washington, D.C. — The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Northern District of Texas against Walter Dunning Larrick, III, a former resident of Corpus Christi, Texas, and Cambridge Financial Advisors, LLC, a Texas limited liability company owned and controlled by Larrick. The complaint alleges Larrick and Cambridge fraudulently induced at least 70 people to invest over $3.6 million in a purported commodity pool and then misappropriated most of the pool funds.
In its continuing litigation, 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 charged.
According to the complaint, from at least November 2020 and continuing through at least January 2023, the defendants solicited and pooled at least $3,644,817.52 from approximately 70 pool participants (pool participants) for the purported purpose of trading futures contracts and options on futures contracts. To induce the pool participants to send them money, the defendants made fraudulent and material misrepresentations and omissions including Cambridge had been in business for over 20 years and had a history of providing clients with profitable returns; Cambridge was a U.S.-based company and pool participants’ funds would be maintained by Cambridge in a bank account in the U.S.; pool participants’ funds would be used to trade futures and options, including natural gas, oil, and gold, which Cambridge would purchase in large “blocks” and at a discounted rate; Cambridge employed a hedging strategy that ensured the profitability of its trading regardless of whether the price of the underlying commodity rose or fell; Cambridge would receive a 15% commission on trading profits; and pool participants could withdraw their funds at any time.
Instead of trading the funds as promised, the defendants misappropriated the pool participants’ money. The defendants transferred the majority of the funds to offshore bank accounts in Costa Rica, and used most of the remaining funds to pay for various personal expenses for Larrick, or to make Ponzi-like payments to pool participants. To conceal their misappropriation, the defendants created and issued false account statements that misrepresented trading returns pool participants purportedly earned. When pool participants requested their funds, the defendants either ignored their requests or engaged in conduct designed to delay payouts for as long as possible.
The CFTC would like to acknowledge the assistance of the Superintendencia General de Valores de Costa Rica (SUGEVAL).
The Division of Enforcement staff responsible for this matter are James H. Holl, III, Sarah Wastler, Brendan Forbes, Kevin Samuel, Erica Bodin, and Rick Glaser.
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 CFTC 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 may be 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.