December 12, 2013
CFTC Orders David R. Lynch to Pay More than $470,000 in Restitution and a Civil Monetary Penalty to Settle Charges of Fraudulent Misappropriation, Fraudulent Solicitations, and False Statements
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring David R. Lynch of Stuart, Florida, to make restitution of $171,297 to defrauded customers and pay a $300,000 civil monetary penalty, among other sanctions, for fraudulent misappropriation, fraudulent solicitations, and false statements in connection with a commodity pool trading leveraged or margined off-exchange foreign currency contracts (forex). Lynch has never been registered with the CFTC.
According to the CFTC’s Order, from about December 2008 through July 4, 2013, Lynch operated a commodity pool and fraudulently solicited at least $348,450 from at least 14 pool participants. Lynch falsely told pool participants that he had earned as much as 7 percent per month trading forex, that they could never lose their principal, and that they could get their funds back at any time. However, Lynch deposited only a portion of his pool participants’ funds in forex trading accounts and the trading he did was unprofitable, the Order finds.
The CFTC’s Order also finds that Lynch misappropriated over $126,000 of his pool participants’ funds by using part of those funds to pay his personal expenses and the remainder to pay false profits or purported returns of capital to some pool participants in the manner of a Ponzi scheme. Further, to conceal his trading losses and misappropriations, Lynch issued monthly account statements to pool participants that falsely showed that pool participants were earning consistent profits.
In addition to ordering restitution to be made and imposing a civil monetary penalty, the CFTC Order also requires Lynch to cease and desist from further violations of the Commodity Exchange Act and a CFTC regulation, as charged, and imposes permanent bans on trading, registration, and certain other commodity related activities.
CFTC Division of Enforcement staff members responsible for this case are Glenn I. Chernigoff, Alison B. Wilson, Kara L. Mucha, and Gretchen L. Lowe.
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CFTC Fraud Awareness & Prevention Information
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including Commodity Pool Fraud. The CFTC Commodity Pool Fraud Advisory warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools. Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or an online form.
Last Updated: December 12, 2013