For Release: October 6, 2006
Federal Court Imposes More than $14.7 Million in Sanctions on Two Florida Corporations and Five South Florida Men in Commodity Options Fraud Case
Court’s Order Against Worldwide Commodity Corporation States that Worldwide Fraudulently Told Prospective Customers They Could Expect to Make Large Returns on Their Investments Quickly by Trading Commodity Options Based upon Various Well-Known World Events, Such as the War in Iraq
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable Anita B. Brody of the United States District Court for the Eastern District of Pennsylvania entered a consent order (consent order) against Worldwide Commodity Corporation, (Worldwide), South Coast Commodities, Inc., (SCC), both of Pembroke Pines, Florida; Steven Labell, Larry Kahn, Joseph Allen, all of Plantation, Florida; Phil Ferrini of Hollywood, Florida and Stuart Schwartz of Cooper City, Florida. The consent order permanently bars Worldwide, SCC, Labell, Kahn, Allen, Ferrini and Schwartz from any commodity-related activity and imposes more than $14.7 million in monetary sanctions for their violations of the anti-fraud provisions of the Commodity Exchange Act (CEA) and the CFTC's regulations.
The consent order, entered on September 20, 2006, arises from a CFTC complaint filed on August 2, 2004 (see CFTC News Release 4971-04, August 13, 2004), and amended complaint filed on October 28, 2005, which alleged that Worldwide, SCC, Labell, Kahn, Allen, Ferrini, and Schwartz misrepresented facts and omitted pertinent information when soliciting customers to trade options in violation of the CEA and the CFTC regulations.
According to the consent order, from at least January 2003 through January 2005, Worldwide and its sales staff, including Allen, Ferrini, and Schwartz, fraudulently solicited members of the public using high-pressure sales tactics to trade options.
The consent order further states that Worldwide fraudulently told prospective customers they could quickly make large returns by trading commodity options based upon various well-known world events -- such as the war in Iraq or on seasonal trends. They claimed that trading on such events would virtually guarantee a profit in a short period of time with little risk of loss. (See the CFTC’s Consumer Advisories on promises of easy profits from commodity futures and options based on seasonal demand and other well-known public information and from the war on terrorism.)
The consent order recites that those statements were false and misleading because efficient markets quickly factor publicly known information into the price of commodity contracts and there is substantial risk trading options. As a result, the consent order continues, rather than reap profits, 98% of Worldwide’s approximately 341 customers lost money, suffering total losses of more than $5 million—more than $3.5 million of which went to pay for commissions and fees.
The consent order also finds that Labell and Kahn, Worldwide’s principals, are liable because they controlled the operations of Worldwide and knowingly induced the violations or failed to act in good faith concerning the fraudulent acts.
In addition, the consent order finds that SCC was a successor corporation to Worldwide and is liable for the fraudulent actions of Worldwide’s employees.
The consent order requires Worldwide, SCC, Labell, Kahn, Allen, Ferrini, and Schwartz to repay customers more than $5 million, making defendants Worldwide, SCC, Labell, and Kahn jointly and severally liable and Allen, Ferrini and Schwartz liable in the following amounts: Worldwide and SCC, $5,021,892 each; Labell and Kahn, $2.5 million each; Allen, $435,000; Ferrini, $320,000; and Schwartz, $460,000.
In addition, the consent order requires these defendants to pay civil monetary penalties totaling more than $8 million in the following amounts: Worldwide and SCC, $3.5 million each; Labell and Kahn, $525,000 each; Allen, $159,042; Ferrini, $152,178; and Schwartz, $176,178.
Finally, the consent order permanently enjoins these defendants from engaging in any commodity-related activity, including soliciting funds or engaging in trading in any market regulated by the CFTC.
Universal Financial Holding Corporation Also Found Liable
In a separate order, Universal Financial Holding Corporation (Universal) of Aventura, Florida, was found liable for Worldwide’s fraudulent conduct pursuant to a guarantee agreement. Accordingly, Universal is jointly and severally liable with Worldwide for the imposed restitution.
The following CFTC staff members are responsible for this case: Kenneth McCracken, Jeff Le Riche, Jo Mettenburg, Lacey Dingman, Jan Folena, and Richard Glaser.
Last Updated: October 4, 2011