Release: #4158-98 (Civ. H-96-1213, S.D. Texas) (1-98-cv-1594, N.D. Georgia)

For Release: June 16, 1998


Court's Action Stems from a CFTC Civil Complaint Filed in 1996,

Charging the Defendants with Defrauding Commodity Pool Investors by Providing False Statements and Commingling Funds, Among Other Violations

CFTC Additionally Files Complaint and Proposed Consent Order Against Schafer in Georgia Alleging that Schafer Committed a $250,000 Commodity Fraud

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on June 8, 1998, the U.S. District Court for the Southern District of Texas entered a consent order of permanent injunction against Christopher C. Schafer and A.R.S. Financial Services, both of Alpharetta, Georgia. In that order, Schafer admitted liability for fraudulent actions taken in connection with the Genesis commodity pool organized in Texas and agreed to make restitution payments to investors.

The court also issued a separate consent order that finalizes the liability of two other defendants, Peter J. Urbani and Alchemy Financial Group, Inc. of Cypress, Texas, but leaves open for trial issues of appropriate sanctions against those defendants. The CFTC is seeking permanent injunctions and other remedial relief, including restitution, against those defendants as well. That consent order also provides for release of frozen funds of Alchemy, a commodity pool operator (CPO) of Genesis, for payment by a court-appointed Monitor to investors in Genesis.

The court's action stems from a civil injunctive complaint filed on April 17, 1996, charging that the defendants engaged in violations of the Commodity Exchange Act (CEA) and CFTC regulations. The court had previously entered a consent order of preliminary injunction against Schafer and A.R.S. Financial Services on May 24, 1996 (see CFTC News Release #3914-96, June 5, 1996).

Court's Order Finds that Schafer Defrauded Investors

Specifically, the court's June 8th order finds that Schafer defrauded investors in his capacity as a CPO and commodity trading advisor for Genesis by making false oral and written statements about the commodity futures transactions completed for Genesis and the profitability of such transactions he engaged in for the pool. Schafer also caused others to provide false reports and statements to investors, the order finds.

The court found that among the false statements made to investors was that pool assets totaled $162,000, including profits of $74,000, when, at the time the statement was made, the futures trading for the pool had resulted in almost total losses for the pool.

In addition, the court found that Schafer and A.R.S. Financial Services violated various CFTC provisions related to their commodity pool and futures trading activities, by:

-- failing to provide required disclosure statements to investors;

-- failing to file the required disclosure statements with the CFTC and the National Futures Association (NFA);

-- commingling investors' funds with their own; and

-- failing to provide proper account statements to investors.

The court also found that Schafer engaged in fraud in connection with trading during 1993 and 1994 for an individual customer, who was not an investor in Genesis. Schafer was found to have received at least $26,000 from that customer without being registered as a futures commission merchant, as required, and to have commingled those funds with his own and with those of other customers. Schafer was also found to have made false statements to the customer about the futures transactions completed on the customer's behalf and to have falsely reported that profits accumulated in the customer's account.

NFA Appointed Monitor to Disburse Funds to Investor

Under the terms of the June 8th consent order of permanent injunction, Schafer and A.R.S. Financial Services are permanently enjoined from committing further violations of the CEA and CFTC regulations. The order also prohibits Schafer and A.R.S. Financial Services from seeking registration with the CFTC, from acting in any capacity which requires registration, or from engaging in any commodity futures-related activity, including soliciting new customers or customer funds.

In addition, the order provides for the immediate transfer to the National Futures Association, acting as Monitor, of funds held by Schafer in a bank account under the terms of the consent order. Schafer has been ordered to make continuing repayments, based upon his income, of all customer losses to the Monitor, amounting to $109,300 plus pre-judgment and post-judgment interest. The Monitor is charged with disbursing those funds to investors in the fashion described in the order.

CFTC Files Complaint and Consent Order Against Schafer in the Northern District of Georgia

The CFTC also announced today that on June 4, 1998, it filed a two-count civil injunctive complaint against Christopher C. Schafer in the Northern District of Georgia and a proposed consent order.

In the proposed consent order, Schafer has simultaneously consented to permanent relief enjoining him from further commodity-related activity and from violating the sections of the CEA, as charged in the complaint. Schafer has further agreed to make restitution to all affected investors, while reserving issues as to restitution amounts owed to two investors for determination by the court. The proposed consent order has been presented to the judge.

The complaint alleges that -- from at least January 1993 through at least April 1996 -- Schafer solicited, accepted, and received at least $253,785 from at least 12 investors to trade commodity futures. The complaint charges that, in handling such funds, Schafer violated the CEA's anti-fraud provisions by fraudulently reporting and issuing false statements to investors reporting that accounts traded on behalf of investors had earned profits, when the accounts had incurred significant losses.

Finally, the complaint alleges that Schafer acted as a futures commission merchant without being registered as such with the CFTC and commingled customer funds provided to him for trading commodity futures with his personal funds.

Under the proposed consent order, Schafer is to make restitution payments to a fund for investors that is to be administered by the National Futures Association.

The CFTC was assisted in the filing of this matter by the U.S. Attorney's Office for the Northern District of Georgia.