For Release: March 22, 2007
New York Federal Court Orders Brokerage Firm, Clearing Firms, and Principals in CFTC Anti-Fraud Action to Pay More Than $21,000,000 in Restitution and Civil Penalties
Defrauded Customers Lost More Than $11,000,000 Trading Options
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that on February 27, 2007, The Honorable Harold Baer, Jr. of the United States District Court for the Southern District of New York issued a consent order of permanent injunction against Commodity Investment Group, Inc. (CIG) of Ft. Lauderdale, Florida; Linda R. Kuhney and Michael Kuhney of Coral Springs, Florida; and International Commodity Clearing, LLC (ICC) and National Commodities Corporation, Inc. (NCCI), both of Ft. Lauderdale, Florida. The consent order establishes restitution and monetary penalties totaling $21,819,785.
The consent order stems from the complaint filed by the CFTC on June 21, 2005, (see CFTC News Release 5088-05, June 23, 2005) alleging that CIG misrepresented facts and omitted pertinent information when soliciting customers to trade commodity options in violation of the CEA and CFTC regulations. Moreover, as alleged, Linda Kuhney instructed the brokers that in the event that the National Futures Association (NFA) or the CFTC ever conducted an audit, the employees were to hide the written sales scripts they used to solicit customers. Indeed, when the NFA did audit CIG, Linda Kuhney rushed into the office to warn the brokers to hide the sales scripts.
According to the consent order, from at least February 2001, CIG, by and through its employees, misrepresented the likelihood of profits from trading commodity options and minimized the risk of loss. As well, in light of profit representations they made, CIG employees failed to disclose that more than 90% of CIG’s approximately 1,200 customers lost money trading commodity options. Indeed, from February 2001 through December 2005, CIG customers more than $11 million.
The consent order states that Linda Kuhney and Michael Kuhney are liable for CIG’s violations as controlling persons who failed to act in good faith to prevent the violative acts. The consent order also states that Michael Kuhney aided and abetted CIG’s misconduct. In addition, the consent order states that NCCI and ICC signed guarantee agreements with CIG and thus, are liable for CIG’s financial obligations during the respective periods these guarantee agreements were in effect.
The consent order, among other things, permanently enjoins CIG, Linda Kuhney and Michael Kuhney from engaging in any commodity-related activity, including soliciting funds or engaging in trading in any market regulated by the CFTC. The consent order requires CIG to pay $11,819,785 in restitution to its customers. Of this amount, NCCI is joint and severally liable for $8,445,428 and ICC is jointly and severally liable for $3,374,357. Additionally, Linda Kuhney and Michael Kuhney are each liable for restitution of $1.25 million. The consent order further assesses civil monetary penalties against CIG in the amount of $7 million, against Linda Kuhney in the amount of $250,000 and against Michael Kuhney in the amount of $250,000.
The following CFTC Division of Enforcement staff members are responsible for this case: W. Derek Shakabpa, Eliud Ramirez, David Oakland, Nathan Ploener, Manal Sultan, Lenel Hickson, Jr., Stephen J. Obie, Richard Wagner, and Vincent McGonagle.
Last Updated: July 25, 2007