For Release: September 18, 2008
CFTC Files Action to Revoke the Registration of Portland, Oregon, Hedge Fund Beacon Rock Capital, LLC
CFTC Action is Result of the Fund’s Criminal Conviction for Fraudulent Market Timing in the Trading of Mutual Funds
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today revoked the registrations of Portland, Oregon hedge fund Beacon Rock Capital, LLC (Beacon Rock) as a Commodity Pool Operator and Commodity Trading Advisor. The CFTC’s Opinion and Order is based on Beacon Rock’s conviction in the first criminal case in U.S. history against a hedge fund for engaging in fraudulent market timing.
Beacon Rock’s registrations are subject to statutory disqualification under the Commodity Exchange Act (CEA), which authorizes the CFTC to revoke the registration of any person, as defined by the CEA, that has been convicted of a felony that: involves any transactions concerning a security; arises out of the conduct of the business of a securities broker, investment adviser or investment company; or involves fraud. The CFTC’s order finds that the criminal conviction for securities fraud justifies revoking Beacon Rock’s registrations with the agency.
Beacon Rock Charged Criminally in 2007; Pled Guilty in April 2008
On April 3, 2007, the U.S. Attorney for the Eastern District of Pennsylvania charged Beacon Rock with engaging in a scheme to defraud mutual funds and their shareholders in connection with the short-term trading of mutual funds. According to the criminal charges, through this scheme, Beacon Rock allegedly made in excess of 26,000 market timing trades, resulting in approximately $2.4 million in net trading profits.
As stated in the CFTC’s order, Beacon Rock pled guilty to the criminal charges on April 4, 2008, and on May 8, 2008, the U.S. District Court for the Eastern District of Pennsylvania sentenced the firm to three years of probation and a $600,400 fine.
The following CFTC Division of Enforcement staff were responsible for this case: Ava M. Gould, Mary Elizabeth Spear, Scott R. Williamson, Rosemary Hollinger and Richard Wagner.
Last Updated: September 18, 2008