Release:#3993-97 (94-C4375)

For Release: February 21, 1997


Court Says Defendants in the Case Operated an Unregistered Commodity Pool in a Manner Akin to a Ponzi Scheme, Among other Violations of Federal Commodity Law

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that Judge Joan B. Gottschall of the U.S. District Court for Northern Illinois entered an order of permanent injunction against Edward M. Collins of Hoffman Estates, Illinois, a defendant in a six-count civil anti-fraud action filed on July 19, 1994 (See CFTC News Release #3777-94). Thomas Collins of Palatine, Illinois, Edward's brother who is now deceased, and Lake States Commodities, Inc. of Rolling Meadows, Illinois, were also named in the CFTC complaint.

The complaint alleged that from at least January 1989 to June 1994, the defendants cheated and defrauded investors and committed commodity pool fraud by, among other things, misrepresenting to commodity pool investors that their funds were invested in a multi-million dollar commodity pool, when, in fact, such an account did not exist; issuing statements which falsely reported that investors' accounts were increasing in value as a result of gains in the commodity pool trading account; misrepresenting that investors could expect 30 to 50 percent annual returns on their investment when there was no reasonable basis for such representations; and advising investors that their investment relationship was to be construed as a personal loan to Thomas Collins, with no statements issued that could link the customers to the futures market.

Thomas Collins, who was president of Lake States Commodities, fled his Illinois residence in June 1994. His whereabouts were unknown until July 22, 1996, when he died in San Diego, California. Edward Collins was the secretary and a shareholder of Lake States Commodities. Neither Edward Collins nor Lake States Commodities has ever been registered with the CFTC; Thomas Collins had been registered as a floor trader since February 1994, and had been a member of the MidAmerica Commodity Exchange since 1985.

Court Finds that Edward Collins Violated Federal Commodity Law

The court's permanent injunctive order against Edward Collins finds that Edward Collins violated anti-fraud and registration provisions of the Commodity Exchange Act, as charged in the complaint, and enjoins him from further such violations of Federal commodity law.

According to the court's order, "The evidence indicates that on repeated occasions, [the] defendant made misrepresentations to investors and potential investors, issued false reports and statements, and solicited funds for a fraudulent scheme. Defendant's fraudulent activities continued in modified form even after the commencement of the CFTC's investigation."

Edward Collins Also Is a Respondent in an Ongoing CFTC Administrative Action

On May 19, 1994, the CFTC filed an administrative enforcement action against Edward and Thomas Collins, alleging, among other things, that they engaged in fictitious sales and noncompetitive trades in violation of the CEA (CFTC Docket No. 94-13, CFTC News Release #3765-94). That matter is pending before CFTC Administrative Law Judge Bruce C. Levine.

On June 21, 1994, involuntary bankruptcy actions were filed against Thomas Collins and the defunct Lake States. The bankruptcy trustee has brought adverse actions against Edward Collins and others to recover funds on behalf of investors and other creditors. A number of these adverse actions are pending.

# # #