August 11, 2014
CFTC Orders New York Resident Jacob N. Stein to Pay More than $344,000 in Restitution and Civil Monetary Penalty for Commodity Pool Fraud and Misappropriation
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an Order requiring Jacob N. Stein of Hankins, New York, individually and doing business as TEPdesign, Inc., to pay restitution of $244,400 to defrauded customers and a $100,000 civil monetary penalty, for committing fraud and misappropriation in connection with a commodity pool that traded leveraged or margined off-exchange foreign currency contracts (forex). Neither Stein nor TEPdesign, Inc. has ever been registered with the CFTC.
According to the CFTC’s Order, from about January 2010 through September 2012, Stein, without registering with the CFTC as a Commodity Pool Operator, solicited and obtained approximately $524,000 from at least 17 investors (Pool Participants) to participate in a commodity pool for the purpose of trading leveraged or margined forex. Stein used approximately $83,000 of the funds solicited to trade forex, of which over $80,000 was lost in forex trading, the Order states. Instead of reporting these losses to the Pool Participants, Stein created and distributed to the Pool Participants false account statements indicating that Stein was earning profits for the Pool Participants through forex trading. The Order also finds that the remaining funds, approximately $441,000, were misappropriated by Stein to pay fabricated “profits” and returns of principal to Pool Participants and for Stein’s personal expenses, such as car payments and retail purchases. Ten Pool Participants are still owed approximately $244,400 in principal, the Order finds.
In addition to ordering restitution and imposing a civil monetary penalty, the CFTC Order also requires Stein to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposes permanent bans on Stein’s trading, registration, and certain other CFTC-regulated activities.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this case are Patrick Daly, Xavier Romeu-Matta, Michael C. McLaughlin, David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.
* * * * * *
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: August 11, 2014