For Release: February 8, 2008
Michigan Couple Ordered to Pay More Than $3.1 in Sanctions for “Private Hedge Fund” Fraud
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that a federal court judge in Michigan ordered Ty and Monette Klotz, a couple formerly residing in Mason, Michigan, to pay more than $1.8 million in restitution to investors whose funds they had misappropriated and more than $1.3 million in penalties. In addition, based on a reasonable likelihood of future violations by the Klotz defendants, the judge entered a permanent injunction order against them.
The order, entered on February 1, 2008, by Judge Robert Holmes Bell of the U.S. District Court for the Western District of Michigan, resolves CFTC charges against the Klotzs based on their orchestration of a fraudulent investment scheme, while operating what they described as a “private hedge fund” (see CFTC News Release 5169-06, March 17, 2006). Claims are still pending against the two Michigan companies the Klotzs used to perpetrate the scheme: Aurifex Commodities Research Co. and Aurifex Research LLC. CFTC v. Aurifex Commodities Research Co., et al., No. 06-CV-0166 (W.D. Mich.).
The order finds that the Klotzs, operating under the name “Aurifex Investment” as well as through the two corporations also bearing the Aurifex name (collectively Aurifex), made numerous false and misleading statements to participants and potential participants regarding Aurifex and its operation as a “private hedge fund,” while misappropriating invested funds. Among the misrepresentations made by Ty Klotz, were statements that Aurifex’s return for investors had been averaging 20 percent per month and that the investments were without risk as they were insured through a Lloyd’s of London insurance policy. Ty Klotz was also found to have sent fraudulent statements to investors reporting false profits.
Also, the order finds that that the Klotzs, along with distributing invested funds back to participants in a Ponzi-like scheme, used Aurifex funds to purchase personal items for themselves, including his and her Rolex watches, more than$140,000 in gold and silver, a house and home renovations, medical treatment, and automobiles. The court concluded that 352 individuals invested at least $2,226,267.59 in Aurifex and that $1,826,708.16 is still owed to investors and, thus, ordered restitution to be paid in that amount.
The following CFTC staff members are responsible for this case: Susan Padove, Merle K. Hampton, Thomas J. Koprowski, Venice Bickham, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
Last Updated: February 8, 2008