March 24, 2014
Federal Court in North Carolina Orders Mitchell Brian Huffman to Pay $2.1 Million Penalty for Defrauding Customers of More than $3.2 Million in Commodity Pool Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court supplemental Consent Order requiring CFTC Defendant Mitchell Brian Huffman, of Charlotte, North Carolina, to pay a $2.1 million civil monetary penalty for operating a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts (see CFTC Press Release 6183-12, February 17, 2012). In an separate Order as part of Huffman’s criminal sentencing, Huffman was ordered to pay $3.2 million in restitution to defrauded customers (see United States v. Mitchell Bran Huffman, Case Number 3:1-cr-00246 RJC filed in the U.S. District Court for the Western District of North Carolina).
The supplemental Order was entered on March 20, 2014, by Judge Graham Mullen of the U.S. District Court for the Western District of North Carolina and follows a Consent Order of permanent injunction entered on May 10, 2012, by Judge Mullen.
The Consent Order finds that Huffman operated a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts. In agreeing to the entry of the Consent Order, Huffman admitted to the factual and legal allegations contained in the CFTC’s Complaint, and the findings of fact and conclusions of law in the Consent Order. The Consent Order also imposes permanent trading and registration bans against Huffman, prohibits him from violating federal commodities law, as charged, and requires him to pay restitution and a civil monetary penalty as provided for in the supplemental Order.
According to the CFTC’s Complaint, from at least August 2006 to March 11, 2011, Huffman solicited prospective and actual pool participants, mainly family and friends, via in-person and direct telephone solicitations, to allow him to buy and sell exchange-traded commodity futures contracts on their behalf. During the period, Huffman accepted at least $3.2 million from approximately 30 participants throughout the United States. Huffman entered into “sponsorship agreements” with pool participants wherein Huffman represented that he would pool participants’ funds to trade commodity futures contracts on their behalf. Huffman represented to participants that he utilized a “proprietary trading program” that generated “profits” of 100 percent to 150 percent per year. Huffman claimed to retain 20 percent of all profits purportedly made from the “proprietary trading program.”
All of these representations by Huffman were false, according to the Consent Order. Unknown to participants, Huffman misappropriated participants’ funds for a variety of personal uses, including but not limited to (1) purchasing multiple motor vehicles for his personal use, including two Land Rovers and a Smart Car, (2) at least $71,255 for purchases related to Huffman’s classic car collection, (3) approximately $188,583 on personal travel and luxury vacations, including Disney cruises and first-class airfare to Hawaii and Las Vegas, Nevada, and (4) approximately $51,540 in charitable contributions in Huffman’s name. The trip to Hawaii was a 25th wedding anniversary celebration for Huffman, and Huffman brought along several pool participants on the trip to Hawaii, purportedly at his own expense, according to the Consent Order. These participants were completely unaware that their funds were being used by Huffman to pay for the luxury vacation. When Huffman could no longer sustain his fraudulent scheme, he admitted to special agents of the Charlotte, North Carolina office of the Federal Bureau of Investigation the fraudulent scheme described above and his participation therein, the Consent Order finds.
The CFTC appreciates the assistance of the Office of the United States Attorney for the Western District of North Carolina and the Federal Bureau of Investigation, Charlotte Office.
CFTC Division of Enforcement staff members responsible for this case are Timothy J. Mulreany, Michael Amakor, and Paul Hayeck.
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CFTC’s Commodity Pool Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which 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 file a tip or complaint online.
Last Updated: March 24, 2014