October 19, 2011
CFTC Obtains Permanent Injunction against California Resident Scott Bottolfson and His Two Companies for Defrauding Customers in Multi-Million Dollar Commodity Pool Ponzi Scheme
Court order requires defendants to pay a civil monetary penalty of more than $6.8 million and permanently bars them from the commodities industry.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced today that Judge Anthony J. Battaglia of the U.S. District Court for the Southern District of California entered a consent order of permanent injunction against Scott Bottolfson and Spirit Investments, Inc. (Spirit), both of Encinitas, Calif., and Increase Investments, Inc. (Increase) of Reno, Nev., requiring them jointly and severally to pay a civil monetary penalty of $6,813,462.51. The order also imposes permanent trading and registration bans against the defendants.
The court’s order stems from a CFTC enforcement action filed on January 7, 2011, that charged Bottolfson, Spirit, and Increase with operating a $14 million commodity pool Ponzi scheme and misappropriating $11 million of customer funds from at least 2002 through 2010 (see CFTC News Release 5962-11, January 11, 2011).
The order finds that Bottolfson solicited pool participant to trade commodity futures in two commodity pools, through his companies, Increase and Spirit. Bottolfson solicited approximately $14 million from participants to be traded in the pools, but instead of trading pool participant funds as promised, he deposited only approximately $2.97 million into trading accounts. The remaining $11.03 million was deposited into Bottolfson’s personal accounts and used for his personal expenses, to make so-called profit payments to participants, as is typical of a Ponzi scheme, or was otherwise misappropriated, the order also finds. Of the $2.97 million deposited into trading accounts, Bottolfson lost approximately $845,000 trading, according to the order.
The court’s entry of the consent order represents the successful conclusion to a joint effort between the CFTC and the U.S. Attorney’s Office for the Southern District of California. On February 11, 2011, judgment was entered against Bottolfson in the criminal case against Bottolfson (US v. Scott Bottolfson, No.10CR4734 JM), finding him guilty of wire fraud. Bottolfson received a 60-month jail sentence and was ordered to pay $6,813,462.51 in restitution in the criminal action.
The CFTC appreciates the assistance of the National Futures Association, the U.S. Attorney’s Office for the Southern District of California, and the Federal Bureau of Investigation.
CFTC Division of Enforcement staff members responsible for this case are Jason Mahoney, George Malas, Paul G. Hayeck, and Joan Manley.
Last Updated: October 19, 2011