Release : 4212-98 (CFTC Docket No. 98-13)

For Release: December 3, 1998


ALJ Finds Sanctions Including Cease and Desist Order, Revocation of Registration, Permanent Trading Prohibition, and Civil Monetary Penalty of $2,613,000 to be Warranted

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on November 10, 1998, Administrative Law Judge Bruce C. Levine issued a Preliminary Order Making Findings that Todd Alan Thomas of Boca Raton, Florida, is not entitled to relief from his default status. Based on the allegations of the CFTC complaint, ALJ Levine further found that Thomas violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations by fraudulently soliciting customers to purchase commodity options. The Commission's complaint, in CFTC docket No. 98-13, was filed on April 27, 1998 (see CFTC News Release #4139-97, April 28, 1998).

According to the preliminary order, Thomas failed to file a timely answer to the complaint, and therefore was in default. In denying Thomas relief from his default status, Judge Levine wrote in his preliminary order that respondents "have an affirmative obligation to exercise diligence in meeting procedural deadlines," and "[a] party who hires a lawyer to represent him does not shed this duty." ALJ Levine concluded that Thomas was not entitled to relief from his default because the default was willful and not the result of excusable neglect, and Thomas had failed to demonstrate that he has a meritorious defense to the charges set out in the complaint.

Based on the allegations of the complaint, Judge Levine then concluded that in publicly broadcast infomercials and telephone solicitations of customers, "Thomas misrepresented the risk of trading options contracts, the possibility of earning profits generally, the relationship between the options on futures market and the cash market, and the possibility of earning profits in the options market based on knowledge of regular, predictable price trends." Accordingly, the court found that Thomas violated the anti-fraud provisions of section 4c(b) of the CEA and section 33.10 of the CFTC's regulations.

ALJ Levine found that the allegations of the CFTC complaint provided a sufficient basis for ordering Thomas to cease and desist from further fraud violations, revoking Thomas' registration as an associated person, permanently prohibiting Thomas from trading on any contract market, and imposing a civil monetary penalty against Thomas in the amount of $2,613,000. The ALJ did not enter a final order pending further consideration of whether Thomas also should be ordered to pay restitution.