April 20, 2017
CFTC Charges Purported Hedge Fund Capitol Equity FX LLC and California Residents Robert Leland Johnson IV and Marisa Elena Johnson with Fraud, Misappropriation, and Registration Violations
Washington, DC –The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Central District of California, Eastern Division, against Capitol Equity FX LLC (Capitol Equity), a purported hedge fund operating in California, and its principals and agents, Robert Leland Johnson IV and Marisa Elena Johnson, both of Chino, California (collectively, Defendants).
The CFTC Complaint, filed on April 19, 2017, charges Defendants with commodity futures fraud; off-exchange, leveraged or margined retail foreign currency (forex) fraud; commodity pool fraud; and failure to register with the CFTC, as required. The Complaint also charges Capitol Equity with engaging in activities prohibited for a commodity pool operator, including commingling customer funds with Defendants’ personal funds.
Misrepresentations and Material Omissions
According to the Complaint, from at least May 2012 through May 2015, Defendants fraudulently solicited at least $1,735,750 from members of the public to participate in a pooled fund that traded commodity futures and forex contracts. As alleged, the Defendants knowingly made material misrepresentations and omissions concerning their trading abilities, strategies, and profits for the purpose of enticing pool participants to transfer funds to Defendants.
Defendants allegedly also created and provided pool participants with fabricated performance statements and account documents designed to mislead pool participants. The Complaint further charges that these fraudulent documents falsely reflected significant trading profits, concealed losses, and overstated account balances by millions of dollars.
Misappropriation of Pool Participants’ Funds
The Complaint alleges that the Johnsons misappropriated all of pool participants’ funds by paying their own personal expenses, by depositing pool participants’ funds into their personal bank accounts, and by trading pool participants’ funds in their personal trading accounts. As alleged, Defendants also diverted a portion of pool participants’ funds to earlier-in-time customers in the manner of a “Ponzi” scheme.
In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.
The CFTC Division of Enforcement staff members responsible for this action are Daniel J. Grimm, Kyong J. Koh, Timothy J. Mulreany, James H. Holl, III, and Paul G. 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: April 20, 2017