For Release: June 20, 2006
U.S. Commodity Futures Trading Commission Charges Pennsylvania Resident Gary Scholze with Fraud and Misappropriation of Customer Funds
CFTC Charges that Scholze Fraudulently Solicited Approximately $1.2 Million from Customers to Trade Commodity Futures and Options Contracts
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U.S. District Court for the District of Vermont against Gary F. Scholze, of Lower Burrell, Pennsylvania, charging him with fraudulently soliciting approximately $1.2 million in a scheme involving commodity futures and options.
The CFTC complaint alleges that, since about August 2001 through May 2006, Scholze, a retired chiropractor, fraudulently solicited -- through professional publications for chiropractors and at commodity trading seminars -- at least 14 customers located throughout the United States to invest in commodity futures and options, through either individual accounts or a pooled account with other customers that he would trade on their behalf.
Among other things, the complaint, filed on June 9, 2006, alleges that Scholze fraudulently promised some customers that they would make a profit and reassured others that they would not lose their principal investment due to his specialized trading strategy. However, the complaint alleges that Scholze traded less than half of the customer funds, sustaining losses of over $200,000, and misappropriated additional investor funds to pay for personal expenses.
Throughout the time period, Scholze allegedly concealed his trading losses and misappropriation by falsely reporting to customers that their investments were growing due to profitable trading. For example, in one alleged incident, a customer who invested $300,000 believed, based on the statements from Scholze, that by early 2005, his investment had grown to over $1 million. According to the complaint, while some customers received partial returns of their investments, since March 2005, customers have not received any funds from Scholze, despite repeated demands.
The complaint also alleges that Scholze failed to register with the CFTC as a commodity trading advisor and a commodity pool operator, as required by the Commodity Exchange Act, and committed other regulatory violations, including failing to provide required disclosure documents, accepting money in his own name and commingling customer funds with personal funds.
The CFTC is seeking a statutory restraining order freezing Scholze’s assets and preventing the destruction or alteration of his books and records, a preliminary and permanent injunction against the defendant, disgorgement and restitution, and payment of civil monetary penalties. The District Court has set a June 22, 2006 hearing date on the statutory restraining order and the preliminary injunction.
U.S. Attorney Files Criminal Charges Against Scholze
In a related matter, on June 19, 2006, Scholze was arraigned in federal court on one count of wire fraud based on a criminal complaint filed by the United States Attorney for the District of Vermont.
The CFTC appreciates the assistance of the Federal Bureau of Investigation, the United States Postal Inspector, and the United States Attorney’s Office for the District of Vermont in this matter.
The following CFTC Division of Enforcement staff members are responsible for this case: Erin Vespe, James H. Holl, III, Kevin Batteh, Gretchen L. Lowe, and Vincent McGonagle.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious Internet websites.
You may contact the CFTC at 1-866-FON-CFTC (1-866-366-2382), visit us at our Customer Protection web page: (/cftc/cftccustomer.htm), or fill out our Internet Report Form identifying your concerns (/enf/enfform.htm).
In addition, the CFTC publishes a series of Consumer Advisories at /cftc/cftccustomer.htm#advisory alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.
Last Updated: April 12, 2007