November 1, 2012
Federal Court in Idaho Orders Brad Lee Demuzio and Demuzio Capital Management, LLC, to Pay over $3 Million in Connection with CFTC Commodity Pool Forex Fraud Action
In related criminal action, Demuzio pleaded guilty to one count of wire fraud, sentencing set for November 5
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge B. Lynn Winmill of the U.S. District Court for the District of Idaho entered a consent order for permanent injunction against defendant Brad L. Demuzio and an order of default judgment against his company, Demuzio Capital Management, LLC (DCM), both of Chubbuck, Idaho, charged by the CFTC with operating a fraudulent $1.8 million commodity pool and foreign currency (forex) Ponzi scheme (see CFTC Press Release 6229-12, April 12, 2012).
The consent order and order of default judgment (final orders) impose a permanent injunction against Demuzio and DCM, respectively, finding that the defendants violated the anti-fraud provisions of the Commodity Exchange Act and failed to register with the CFTC as Commodity Pool Operators (CPOs). In addition to the permanent injunction, the final orders each impose permanent trading and registration bans against Demuzio and DCM and order them to jointly pay restitution of $805,273. In addition, under terms of the final orders Demuzio is required to jointly pay a $1 million civil monetary penalty, and DCM is ordered to jointly pay a civil monetary penalty of $2,415,819.
The final orders find that from at least June 18, 2008 through November 2011, Demuzio, through DCM, solicited and accepted approximately $1.8 million from at least 16 investors to trade forex through a pooled investment vehicle. The final orders find that the defendants misappropriated investor funds to pay Demuzio’s personal expenses and sent emails to investors that falsely represented that their principal remained intact and was earning profits. The final orders also find that the defendants acted as a CPO without being registered as such.
In a related criminal proceeding based on substantially the same facts, Demuzio pleaded guilty in the U.S. District Court for the District of Idaho to one count of wire fraud. Sentencing is scheduled for November 5, 2012.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the District of Idaho and the Federal Bureau of Investigation.
CFTC Division of Enforcement staff members responsible for this action are Lara Turcik, Christopher Giglio, Manal M. Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.
Last Updated: November 1, 2012