For Release: July 26, 2006
South Florida Court Imposes Over $25 Million in Sanctions in Energy and Foreign Currency Options Fraud Case
United Investors Group, Inc., Principals, and Salesmen Fraudulently Touted High Profits with Low Risk, While Customers Lost Millions
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that, on May 19, 2006, the Honorable Daniel T. K. Hurley of the United States District Court for the Southern District of Florida issued a Memorandum Opinion and Final Judgment of Injunctive and Other Equitable Relief against Jay M. Levy of Aventura, Florida, a commodity options salesman with the Boca Raton, Florida-based commodity options trading firm United Investors Group, Inc. (UIG).
The opinion, which was issued after a seven-day bench trial, permanently bars Levy from any commodity-related activity and imposes more than $746,000 in monetary sanctions for his violations of the anti-fraud provisions of the Commodity Exchange Act (CEA) and the CFTC's regulations. On June 28, 2006, the court denied Levy's motion to reconsider the final judgment in all respects except for a clarification and amendment of the post-judgment asset freeze entered against Levy.
In addition, on June 6, 2006, the same court entered a consent order of permanent injunction against UIG; options salesmen Greg P. Allotta and Michael H. Savitsky III, both of Boca Raton; and UIG principals Paul F. Plunkett of Deerfield, Florida, and Andrew D. Ross of Boca Raton. The consent order permanently bars UIG, Allotta, Savitsky, Plunkett, and Ross from any commodity-related activity and imposes more than $24 million in monetary sanctions for their violations of the anti-fraud provisions of the CEA and the CFTC's regulations.
Both the opinion and the consent order arise from a CFTC enforcement action filed on January 3, 2005, which alleged that UIG, Allotta, Levy, Plunkett, Ross, and Savitsky misrepresented facts and omitted material information when soliciting customers to trade options in violation of the CEA (see CFTC News Release 5037-05, January 11, 2005).
Levy's Deceptive Practices Resulted in Losses by All of His Customers
During the trial, evidence was introduced that Levy had approximately 75 customers while at UIG and that every one of those customers lost some or all of their money trading options through UIG. Five of Levy's customers testified against him at trial. According to their testimony, Levy exaggerated profit potential while downplaying risk. Several customers testified that Levy told them that well-known public information (such as the then-upcoming 2004 U.S. presidential election and the war in Iraq) would translate into predictable market movements, which, in turn, would supposedly lead to enormous profits.
The court found the testimony of these customers to be "credible, consistent, and trustworthy." On the other hand, the court found the testimony of Levy to be incredible and evasive. The opinion noted that “essentially, [Levy] claimed that every customer who testified against him was ‘absolutely lying.’” However, the court noted problems with Levy's "selective memory" and that his "testimony [was] rife with internal inconsistencies tripped by his self-serving memorializations of material events."
In its opinion, the court found that Levy violated the CEA and set forth various remedies against Levy. First, the court awarded full restitution ($146,350) to all five customers who testified against Levy, along with pre- and post-judgment interest. Second, the court ordered Levy to pay a civil monetary penalty of $600,000. Third, after finding Levy's liability to be "overwhelmingly established" and that there was a reasonable likelihood that Levy would repeat his misconduct, the court permanently enjoined Levy from engaging in any commodity-related activity, including soliciting funds or engaging in trading for any commodity interest account.
UIG, Allotta, Savitsky, Plunkett, and Ross Are Responsible for Millions in Customer Losses and Penalties Totaling in Excess of $17.5 Million
According to the consent order, between August 2003 and November 2004, UIG and its sales staff used high-pressure sales tactics (among other things) to fraudulently solicit members of the public to trade commodity options. The order states that UIG sales staff, including Allotta and Savitsky, fraudulently told prospective customers they could expect to make large returns on their investments quickly by trading options based upon various well-known world events, such as the war in Iraq or upon seasonal trends that the UIG sales staff claimed virtually would guarantee a profit in a short period of time with little risk of loss.
Those statements were false and misleading, the consent order recites, because efficient markets quickly factor publicly known information into the price of contracts and there is substantial risk in trading options. In fact, the order notes, rather than reap profits, over 95 percent of UIG's approximately 500 customers lost money, suffering total losses of more than $8 million—more than $6.8 million of which went to pay for commissions and fees. The order also stipulates that Plunkett and Ross, UIG principals, are liable because they controlled the operations of UIG and knowingly induced the violations or failed to act in good faith concerning the fraudulent acts.
The order requires UIG, Allotta, Savitsky, Plunkett, and Ross to repay customers more than $8 million, making these defendants jointly and severally liable up to the following amounts: UIG $8,025,020; Allotta $1,621,000; Savitsky $893,000; Plunkett $3,569,400; and Ross $3,772,000. In addition, the order requires these defendants to pay civil monetary penalties totaling more than $17.5 million: UIG $16,299,903; Allotta $379,000; Savitsky $107,000; Plunkett $630,600; and Ross $128,000.
Finally, the order permanently enjoins these defendants from further violating certain provisions of the CEA and from engaging in any commodity-related activity, including soliciting funds or engaging in trading in any market regulated by the CFTC.
The following CFTC staff members are responsible for this case: Charles D. Marvine, Rachel A. Hayes, Lacey Dingman, and Richard Glaser.
Last Updated: April 22, 2010