September 19, 2012
CFTC Charges Grahame Rhodes of Missouri with Fraud, Misappropriation, and Commingling Funds in Multi-Million Dollar Commodity Pool Ponzi Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a federal civil enforcement action in the U.S. District Court for the Eastern District of Missouri, Eastern Division, charging Grahame Rhodes of St. Louis, Missouri, with fraud in connection with operating a decade-long, multi-million dollar commodity pool Ponzi scheme. Rhodes has never been registered with the CFTC in any capacity.
According to the complaint, from at least 2001 to the present, Rhodes operated a Ponzi scheme that specifically targeted his family and friends and fraudulently obtained at least $2.1 million from at least 12 individuals to trade commodity futures in a pooled investment account. Rhodes allegedly solicited prospective pool participants by pretending to be a successful, but cautious, trader who earned annual rates ranging between 20 and 50 percent trading E-mini S&P futures contracts. In reality, Rhodes never achieved the rates of return he represented to potential pool participants and most of his trades lost money, according to the complaint.
According to the complaint, Rhodes misappropriated the entire amount of the participants’ funds he received. He allegedly used the funds he collected from pool participants to pay for his personal expenses, including luxury cars, credit card bills, private school tuition, and mortgage payments. Rhodes also allegedly used the funds he collected to pay fictitious profits to other pool participants in the manner of a Ponzi scheme. Rhodes also allegedly commingled pool participant funds by, among other things, depositing participants’ funds directly into his personal bank account.
To conceal his fraudulent scheme, Rhodes made false representations to pool participants concerning their returns and/or gains on their principal funds and the value of their shares of the pooled funds, according to the complaint. Rhodes also allegedly provided a forged trading account statement to at least one pool participant falsely depicting that this trading account held at least $3.4 million.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act and CFTC regulations, as charged.
The CFTC appreciates the assistance of the U.S. Attorney’s Office in St. Louis, Missouri and the Federal Bureau of Investigation’s Field Office in St. Louis, Missouri.
CFTC Division of Enforcement staff responsible for this case are Traci Rodriguez, Patricia Gomersall, John Einstman, Paul G. Hayeck, and Joan M. Manley.
Last Updated: September 19, 2012