July 27, 2011
Federal Court in Illinois Orders Jay C. Nolan and His Company, Lodge Capital Group, LLC, to Pay $825,000 Civil Monetary Penalty for Multi-Million Commodity Pool Fraud Scheme
Nolan sentenced to 60 months imprisonment in a criminal proceeding for the same fraudulent scheme.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Charles R. Norgle of the U.S. District Court for the Northern District of Illinois entered a consent order requiring defendants Jay C. Nolan of Wilmette, Ill., and his company, Lodge Capital Group, LLC (Lodge Capital), jointly and severally to pay an $825,000 civil monetary penalty for commodity pool fraud (see CFTC Press Releases 5778-10 and 5785-10). The order also imposes permanent trading and registration bans against Nolan and Lodge Capital, among other sanctions.
Specifically, the court’s order finds that, from at least January 2005 through November 2009, Nolan solicited at least $3.9 million from approximately 10 customers to trade commodity futures contracts in Nolan’s Lodge Diversified Fund, LP, commodity pool. Nolan formed Lodge Capital to operate the commodity pool and to receive pool participants’ funds. According to the order, of the approximately $3.9 million of pool participants’ funds defendants deposited into various commodity trading accounts, defendants traded and lost approximately $2.3 million and misappropriated at least $550,000 of pool participants’ funds. The defendants paid themselves incentive fees based on purported profits of the pool, and Nolan spent misappropriated funds to maintain an affluent lifestyle, paying for country club dues and fees, sporting event tickets, and personal credit card bills, according to the order.
The consent order finds that Nolan falsely represented to pool participants that their funds would be invested in Treasury bills (purportedly to be held in a bank in Winnetka, Ill.) that would serve as collateral for the pool’s commodity trading. Nolan also misrepresented to pool participants that the pool was making a monthly profit of 1 percent to 2 percent when, in fact, the pool incurred significant losses, according to the order. Moreover, Nolan and Lodge Capital sent participants account statements that falsely reported the value of the U.S. Treasury bills, the pool’s purported brokerage account, bank balances, total pool assets, total pool liabilities, and net pool assets, according to the order.
In a related criminal proceeding, Judge Milton I. Shadur of the U.S. District Court for Northern District of Illinois sentenced Nolan on March 11, 2011, to 60 months of imprisonment and ordered him to pay $3.3 million in restitution.
The CFTC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Northern District of Illinois.
CFTC Division of Enforcement staff members responsible for this case are Diane M. Romaniuk, Ava M. Gould, Mary Beth Spear, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.
Last Updated: July 27, 2011