For Release: October 8, 2009
Pennsylvania Resident Joseph Forte Admits to Operating a Multi-Million Dollar Ponzi Scheme in CFTC Enforcement Action
Forte barred from trading commodity futures and options contracts and CFTC-regulated foreign currency contracts.
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal court in Philadelphia entered a consent order of permanent injunction against defendant Joseph S. Forte of Broomall, Pa. The CFTC charged Forte with fraud and misappropriation in connection with operating a $50 million commodity pool Ponzi scheme. In the consent order, Forte admits defrauding pool participants.
The CFTC enforcement action was filed in the U.S. District Court for the Eastern District of Pennsylvania on January 27, 2009 (see CFTC Press Release 5594-09, January 8, 2009).
The order bars Forte from trading commodity futures and options contracts and CFTC-regulated foreign currency contracts. Forte is also prohibited from soliciting funds for such trading, registering with the CFTC and acting as a principal, agent or employee of a CFTC registrant. The order also requires payment of restitution to defrauded pool participants and a civil monetary penalty. The specific amounts of restitution and civil penalty will be determined later by the court-appointed Receiver, Marion A. Hecht (see the court’s order appointing a receiver).
In the consent order, Forte admits that, from February,1995,through December, 2008, he fraudulently operated a commodity pool, ran a Ponzi scheme and misappropriated commodity pool funds. Forte admits to fraudulently soliciting at least $50 million from at least 76 individuals or entities to participate in a commodity futures pool to trade S&P 500 stock index futures, foreign currency futures and metals futures. Forte admits that in soliciting prospective and existing participants, he claimed to be a successful commodity futures trader and that his pool had a successful track record. The order finds that, to the contrary, Forte was never a successful trader either for himself or for the pool.
Forte admits he paid himself at least $10 to $12 million as his purported fees for his profitable trading on behalf of the pool. Forte estimates that he spent at least $15 million to $20 million of pool participants’ funds to pay off other pool participants and to pay business expenses.
According to the order, Forte engaged in minimal trading and sustained net losses of at least $3 million trading commodity futures on the pool’s behalf. For a 34-month period from 2004 into 2007, he conducted little to no trading at all. However, Forte issued false statements to pool participants reflecting gains and consistent returns of approximately 20 percent to more than 36 percent annually, and that the pool had increased in value to more than $154 million.
Forte Enters Guilty Plea in Criminal Action
On June 5, 2009, Forte entered into a guilty plea agreement in United States v. Forte in the Eastern District of Pennsylvania. The Securities and Exchange Commission also filed an action against Forte, and the court entered a Partial Final Judgment on September 29, 2009.
The following CFTC Division of Enforcement staff members are responsible for this case: Luke B. Marsh, Timothy M. Kirby, Kara Mucha, Gretchen L. Lowe and Phyllis J. Cela.
Last Updated: October 8, 2009