April 7, 2010
Charleston, South Carolina-based Defendants Ordered to Pay More than $3.9 Million in Restitution and Civil Penalties to Resolve 2008 CFTC Anti-Fraud Action
CSA Trading Group, Inc. and Michael Derrick Peninger charged with commodity pool fraud.
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained more than $3.9 million in restitution and civil monetary penalties in a federal judgment order against CSA Trading Group, Inc. (CSA) and Michael Derrick Peninger, both of Charleston, S.C., in a CFTC anti-fraud action.
The order, entered by the Honorable C. Weston Houck of the U.S. District Court for the District of South Carolina, stems from a CFTC complaint filed in 2008, charging CSA and Peninger with fraud and misappropriation in a $1 million commodity pool scam (see CFTC Press Release 5559-08, October 1, 2008).
The order requires CSA and Peninger to pay, jointly and severally, approximately $1.5 million in restitution and $2.4 million in civil penalties. The order also permanently bars them from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.
The order finds that, from at least October 2002 through January 2007, the defendants fraudulently solicited and accepted more than $1 million from at least 20 individuals to participate in purported commodity pools. The defendants fraudulently misrepresented Peninger’s prior trading success, guaranteed profitable returns and claimed that Peninger’s trading system eliminated the risks of trading commodity futures, according to the order. In addition, the defendants misappropriated pool participants’ funds to pay back pool participants and fund their personal expenses and other business ventures. To conceal their fraud, defendants issued false account statements showing profitable returns and provided false verbal assurances to participants that they were making money, the order further finds.
The court also ordered relief defendants Palmetto State Commodities, Inc. and Daniel Island Builders, LLC, both Charleston-based firms that received funds from the defendants, to disgorge ill-gotten gains of $31,547.62 and $13,323.55, respectively. A prior order, entered by the court on December 11, 2009, required another relief defendant, The Blooming Village Florist, Inc., to disgorge $205,151.97. The relief defendants neither provided legitimate services to the defendants nor have legitimate entitlement to the funds they received.
Peninger was convicted in October 2009 by a federal jury in Charleston of eight counts of mail fraud and one count of making a false statement to an FBI agent in connection with Peninger’s operation of CSA, among other enterprises. U.S. v. Peninger, 2:09-cr-00034-PMD (D.S.C. Oct. 2, 2009). Peninger is scheduled to be sentenced on April 12, 2010.
The CFTC appreciates the assistance of the Civil Division of the U.S. Attorney’s Office of the District of South Carolina and the Atlanta regional office of the Securities and Exchange Commission.
The following CFTC Division of Enforcement staff members were responsible for this case: Kara Mucha, Michelle Bougas, James Garcia, August Imholtz, Kassra Goudarzi, Michael Solinsky, Gretchen L. Lowe and Phyllis J. Cela.
Last Updated: April 15, 2010