November 11, 2011

Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme

The CFTC has been able to get a permanent injunction and default judgment against former Houston resident Jeffery Alan Lowrance and First Capital Savings and Loan. As restitution for their involvement in an alleged off-exchange foreign currency Ponzi scam, both will pay $1.2 million in restitution and a civil monetary penalty of $3.3 million. They have been permanently banned from commodity-related activities.

According to the order, Lowrance and First Capital Savings and Loan fraudulently solicited at least three dozen to get involved in forex trading. The two of them allegedly falsely claimed that they were successful traders and promised up to 4.15% monthly returns on their investments. They also are accused of publishing bogus client account statements that showed supposed monthly profits on the financial firm’s Web site. The court said that not only did both Lowrance and First Capital fail to put the money clients gave them into forex trading accounts, but also, they allegedly misappropriated the funds to set up a religious newspaper, support Lowrance’s personal expenses and the expenses of his family members, and pay supposed profits to existing investors. The order mandates that any entity or person that provided Lowrance and his company with domain registration or web hosting services now pull offline any of their Web sites that are soliciting clients to trade forex or commodity futures.

It was the U.S. Attorney’s Office for the Northern District of Illinois that indicted Lowrance for running a $25 million financial scam. In July, the SEC charged him with running a multimillion-dollar Ponzi scheme that defrauded hundreds of investors. Lowrance allegedly raised about $21 million. The investors he targeted lived in over two dozen US states. He enticed investors by claiming to share their Christian values and government views.

The SEC complaint contends that Lowrance and his financial firm told investors they were guaranteed a “predictable” income each month, along with returns as high as 7.15%. Certain clients even received bogus credit letters. Even though by 2008 Lowrance and his company had lost all of the investors funds, between June 2008 and February 2009 he still solicited at least another $1 million from at least three dozen investors.

The SEC is alleging violations of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and the Securities Act of 1933. It is seeking penalties, disgorgement, and other relief.

Court Orders Jeffery A. Lowrance and His Company to Pay More than $4.5 Million for Operating Foreign Currency Ponzi Scheme, CFTC

SEC CHARGES OPERATOR OF $21 MILLION FOREX PONZI SCHEME, SEC, July 15, 2011

Read the indictment (PDF)


More Blog Posts:
Texas Securities Fraud: SEC Moves to Freeze Assets of Stewardship Fund LP, Stockbroker Fraud Blog, November 5, 2011

Money Laundering Charges Filed Against of Houston Criminal Defense Lawyer Accused of Defrauding Defendants of Over $1M, Stockbroker Fraud Blog, October 28, 2011

Houston Judge Overturns $9.2M Securities Fraud Ruling Against Morgan Keegan, Stockbroker Fraud Blog, October 11, 2011

Continue reading "Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme" »

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Posted In: CFTC , Ponzi Scams , Texas Securities Fraud

September 28, 2011

EagleEye Asset Management LLC Sued by SEC and CFTC for Alleged Forex Trading Scam

In separate securities lawsuits, the Securities and Exchange Commission and the Commodity Futures Trading Commission are both suing EagleEye Asset Management LLC, which a Massachusetts asset management firm, and Jeffrey A. Liskov, its principal.

The CFTC is accusing the two defendants of defrauding at least one US-based client while trading forex on a margined or leveraged basis for her. Per the CFTC’s lawsuit, the client decided to grant permission to EagleEye and Liskov to trade part of her retirement money because Liskov allegedly advised her that this type of trading was appropriate for her conservative investment objects.

However, Liskov allegedly did not warn her of the risks involved or tell her that he did not have a successful track record with forex trading. While the trading did generate short-term profits for the woman, she lost most of the money that she invested. The CFTC contends that instead of revealing the trading losses, Liskov allegedly forged the client’s name and set up a new account opening documents and on more than $3 million in secret wire transfers from her mutual fund account to her forex account so that trading wouldn’t have to stop. The woman client lost more than $3.24 million, while Liskov and EagleEye made about $235,000 in performance incentive fees.

Per the SEC, between 4/08 and 8/10, Liskov made misrepresentations to clients to persuade them to move funds they’d placed in securities investments into forex trading. The SEC contends that these investments were not appropriate for elderly clients that had conservative investment objectives and that this caused them to sustain significant financial losses totaling almost $4 million. EagleEye and Liskov allegedly earned performed fees of over $300K, plus management fees. The Commission believes that having clients make short-term investment gains and then earning performance fees before these gains were lost was the defendants’ plan.

Liskov allegedly did not even help some investors understand the nature of forex trading. With other clients, he deemphasized the degree of investment risk involved. The SEC also says that Liskov made false statements with claims that he had achieved success with forex trades when, in fact, the opposite was the case.

Meantime, Massachusetts Secretary of the Commonwealth William Francis Galvin (D) has also filed administrative charges against the investment advisor firm and Liskov. Galvin is accusing them of violating Massachusetts’s Uniform Securities Act.

Our securities fraud law firm has helped thousand of investors recoup their losses caused by broker misconduct and investment adviser fraud. Working with a stockbroker fraud law firm is the best way to help you get back your lost investment.

Read the SEC's Complaint (PDF)

CFTC Charges Massachusetts Man Jeffrey Liskov and His Company, EagleEye Asset Management, LLC, with Committing a $3 Million Forex Fraud, CFTC, September 8, 2011

State files complaint against local investment advisor, WickedLocal, September 13, 2011

Mass. Adviser Sued by Regulators Over Alleged Forex Trading Scheme, BNA Securities Law Daily, September 9, 2011


More Blog Posts:
Texas Commodity Trading Advisor FIN FX LLC Now Subject to NFA Emergency Enforcement Action, Stockbroker Fraud Blog, April 27, 2011

Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc., Stockbroker Fraud Blog, May 6, 2011

$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm, Institutional Investor Securities Blog, August 29, 2011

Continue reading "EagleEye Asset Management LLC Sued by SEC and CFTC for Alleged Forex Trading Scam" »

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Posted In: CFTC , Fraudulent Trading , SEC Enforcement , Securities Fraud

May 27, 2011

Winell Associates Inc., Maxi Partners GP, and Howard Winell Settle CTFC Charges Accusing Them of Misappropriating Funds and Unauthorized Trading of Over $5.2M

Howard Winell, Winell Associates Inc., and Maxie Partners GP LLC have agreed to pay over $5.2 million to settle Commodity Futures Trading Commission charges accusing them of taking part in unauthorized trading and misappropriating funds related to a commodity futures and options pool. By settling, the respondents are not denying or admitting the allegations. They have, however, agreed to a permanent ban from both trading and registering with the CFTC.

The agency says that in 2005, Winell and the two firms solicited and pooled about $20 million from approximately 25 participants to trade commodity futures and options on commodity futures through Maxie Partners LP, which is a commodity pool. In May 2007, one of the largest participants in the pool asked to redeem about $7 million. The agency says that while the respondents segregated that amount to meet this request, before the redemption was issued the pool suffered substantial losses and had margin calls of about $4 million issued by futures commission merchants that held the pool’s trading accounts. The CFTC says that to keep on trading and meet the margin calls, Winell had to transfer those segregated funds back to the pool’s trading accounts. About $3.8 million of the participant’s money was lost.

It is wrong for brokers and financial advisers to misappropriate funds when doing their job. If you believe that you have suffered financial losses because of broker misconduct, do not hesitate to contact our stockbroker fraud lawyers immediately.

Related Web Resources:
Howard Winell and Winell Associates fined USD5.2m for fraud, HedgeWeek, May 3, 2011

CFTC Sanctions New York Resident Howard Winell and His Companies, Winell Associates, Inc., and Maxie Partners GP, LLC, More than $5.2 Million for Fraud, CFTC, May 2, 2011

Commodity Futures Trading Commission

More Blog Posts:
Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc., Stockbroker Fraud Blog, May 6, 2011

Commodities Industry Fears being held to Regulatory Standards of Securities Industry, Stockbroker Fraud Blog, February 4, 2011

CFTC Files Charges in Alleged California Ponzi Scam Involving the Fraudulent Solicitation of $14 million in Commodity Futures, Stockbroker Fraud Blog, January 18, 2011

Continue reading "Winell Associates Inc., Maxi Partners GP, and Howard Winell Settle CTFC Charges Accusing Them of Misappropriating Funds and Unauthorized Trading of Over $5.2M" »

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Posted In: CFTC , Securities Fraud

May 6, 2011

Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc.

Following the Commodity Futures Trading Commission’s decision to charge 20/20 Precious Metals Inc. and 20/20 Trading Co. Inc. with commodity options fraud and other violations, the U.S. District Court for the Central District of California has frozen the assets and records of the defendants. The commission contends that since 2006, the defendants defrauded prospective clients and customers of at least $4M.

Also named as defendants are Bharat Adatia, Todd Krejci, and Sharief McDowell. They and 20/20 Precious Metals are accused of unlawfully offering, entering, or confirming leveraged copper and palladium transactions. The three employees and 20/20 Trading allegedly committed fraud related to purported leveraged metals transactions.

The CFTC also claims that from 1/1/2006 through 10/2009, 20/20 Trading, McDowell, and Adatia made fraudulent solicitations to the public to sell and buy commodity options through 20/20 Trading while failing to disclose that the complex trades they were recommending made the chances of profit not likely if not impossible. Of the nearly $3.8M that 20/20 customers are said to have lost, about 63% of that went to 20/20 Trading commissions. Over $1.9M was lost by almost half of 20/20 Trading customers, who used individual retirement account funds to open accounts.

After 20/20 Trading closed in October 2009, Adatia established 20/20 Precious Metals. The CFTC says that Adatia closed 20/20 Trading after finding out that the National Futures Association was looking at the company for possible NFA rule violations. The agency says that as customers deposited over $1 million, 20/20 Precious Metals made over $400,000 in commissions.

Related Web Resources:
CFTC Files Anti-Fraud Action against California Companies 20/20 Trading Company, Inc. and 20/20 Precious Metals, Inc. and their Employees, Bharat Adatia, Sharief McDowell and Todd Krejci, CFTC, April 28, 2011

Read the CFTC Order (PDF)


More Blog Posts:
Commodities Industry Fears being held to Regulatory Standards of Securities Industry, Stockbroker Fraud Blog, February 4, 2011

CFTC Files Charges in Alleged California Ponzi Scam Involving the Fraudulent Solicitation of $14 million in Commodity Futures, Stockbroker Fraud Blog, January 18, 2011

Texas Securities Fraud: M25 Investments Inc., M37 Investments LLC, and Two Individuals Must Pay $16.2M Over Alleged Forex and Ponzi Scams, Stockbroker Fraud Blog, November 8, 2010

Continue reading "Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc." »

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Posted In: CFTC , Commodity Options Fraud

February 4, 2011

Commodities Industry Fears being held to Regulatory Standards of Securities Industry

The Securities Industry and Financial Markets Association, the International Swaps and Derivatives Association, and the Futures Industry Association have told the Commodity Futures Trading Commission that the 1934 Securities Exchange Act’s Rule 10b-5 not be the model for how it polices market manipulation under the Dodd-Frank Wall Street Reform and Consumer Protection Law. In a comment letter, SIFMA, FIA, and ISDA told the CFTC not to impose additional duties of inquiry, disclosure, or diligence during bilateral transactions on sophisticated parties.

The groups were responding to a rule proposal involving the CFTC expanding its authority over manipulative and fraudulent conduct. CFTC says the proposal was patterned on Rule 10b-5 and Section 10(b). They contend that securities law standards, such as Rule 10b-5, are hard to adapt and “largely inapplicable” to the derivatives and future arena because the two market frameworks have key structural differences. They want the CFTC to “adopt an antifraud rule” that takes “into account the nature of material information in these markets and the types of duties that may exist.”

The associations also want the CFTC to give guidance that offers market participants clear principals on how to distinguish between “prohibited manipulative conduct” and “legitimate competitive trading practices.” In addition, they want “extreme recklessness” as the scienter standard and any anti-manipulation rule’s scope clarified in regards to the CFTC’s current anti-manipulation authority. ISDA, FIA, and SIFMA want commercial traders to be allowed to trade using their own, nonpublic data about company-specific assets and liabilities.

Shepherd Smith Edwards and Kantas Founder and Securities Fraud Lawyer William Shepherd has this to say: “Our country has just experienced the worst securities debacle in nearly 90 years, which many experts claim was largely caused by deregulation of the securities industry. Despite the ineffectiveness of watered-down securities regulation, the Commodities Industry fears being held to even this weak standard. First among these fears is that those who market commodities contracts to the public may be held to a similar duty as those selling securities. When smooth-talking phone jockeys call dangling profits and little or no risk they should be held responsible for their actions. In other words ‘there ought to be a law.'”

Commodities Future Trading Association

Financial Markets Association

Securities Industry and Financial Markets Association

Continue reading "Commodities Industry Fears being held to Regulatory Standards of Securities Industry" »

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Posted In: CFTC

January 18, 2011

CFTC Files Charges in Alleged California Ponzi Scam Involving the Fraudulent Solicitation of $14 million in Commodity Futures

The Commodity Futures Trading Commission is charging Increase Investments Inc., Spirit Investments, and Scott Bottolfson with securities fraud. The CFTC contends that the defendants solicited about $14 million from 30 individuals for investments in two commodity trading pools that traded options on commodity futures and commodity futures contracts. Increase and Spirit allegedly ran the pools. The commission is seeking restitution for the investment fraud victims, fines, the return of ill-gotten gains, trading and registration bans, and permanent injunctions against future violations of federal commodities laws.

The CFTC contends that from 2002 through August 2010, Bottolfson made false and misleading statements to draw in prospective investors. He is accused of promising a 20% fixed-rate return and making it appear as if the commodity futures investments were not only guaranteed, but also that they protected, risk-free, and profitable.

Investors went on to sustain about $845,000 in trading losses. About $2.97 million had been placed in the commodity pool trading accounts. The CFTC is accusing Bottolfson of allegedly misappropriating about $11 million of investors’ money to pay pool participants their “profits," as well as cover some of his personal expenses.

Shepherd Smith Edwards & Kantas LTD LLP Partner and Stockbroker Fraud Lawyer Robert Kantas says, “Our firm currently represents a group of investors in the Los Angeles area that were defrauded in a similar scheme.” If you are someone who suffered losses as a result of an investment scam, contact our securities fraud law firm immediately. We are committed to helping investors recoup their losses.

Related Web Resources:
CFTC Charges California Resident Scott Bottolfson with Operating a $14 Million Commodity Pool Ponzi Scheme, CFTC, January 11, 2011

Commodity Futures Trading Commission

Ponzi Scams, Stockbroker Fraud Blog

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Posted In: CFTC , Ponzi Scams , Securities Fraud

November 8, 2010

Texas Securities Fraud: M25 Investments Inc., M37 Investments LLC, and Two Individuals Must Pay $16.2M Over Alleged Forex and Ponzi Scams

M37 Investments LLC, M25 Investments Inc., Jeffery Lyon, and Scott Kear Sr. have settled for $16.2 million Commodity Futures Trading Commission charges involving the alleged defrauding of over 200 individuals in a foreign currency scheme. Many of the investment fraud victims were senior investors. The Texas securities fraud agreement was reached between the parties in district court.

The CFTC contends that the defendants solicited about $8 million from approximately 213 individuals to trade off-exchange leveraged foreign currency,
commodity futures contracts, and forex options. The commission says that between December 2007 and September 2009, investors in Texas, West Virginia, Maryland, and Mississippi, and other states were solicited for the trades. Many of the seniors who were targeted were solicited through their churches.

The defendants are accused of guaranteeing investors renewal bonuses, if they reinvested, in addition to guaranteed interest payments on investments. The investors were also allegedly told that “profitable trading” would garner returns. Unfortunately, what ended up happening is that most of the investors’ funds didn’t go toward trading and what was traded resulted in substantial losses.

CFTC says that the few funds that M35 and M25 paid to investors was money that had come from other clients. Because of this, CFTC contends, the two firms ended up running Ponzi scams. The agency also is accusing the defendants of covering up the securities fraud with monthly statement accounts that gave clients the false impression that they were making the 2% monthly interest that they had been promised.

Jointly and severally the defendants will pay $7.404 million in restitution. The two companies will jointly and severally pay a fine of $7.1 million. Lyon’s fine is $375,00 and Kear will pay $1.4 million.

Related Web Resources:
Federal Court Orders More than $16.2 Million in Customer Restitution and Monetary Penalties against Texas Defendants Scott P. Kear, Sr., Jeffery L. Lyon and their Firms in CFTC Anti-Fraud Action, CFTC, October 27, 2010

Read the Complaint (PDF)

Texas Securities Fraud, Stockbroker Fraud Blog

Institutional Investor Securities Blog

Continue reading "Texas Securities Fraud: M25 Investments Inc., M37 Investments LLC, and Two Individuals Must Pay $16.2M Over Alleged Forex and Ponzi Scams" »

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Posted In: CFTC , Foreign Currency Scam , Ponzi Scams , Texas Securities Fraud

October 21, 2010

CFTC Judge Says Colleague Biased Against Investors with Complaints

According to Commodities Future Trading Commission Judge George H. Painter, his colleague, Judge Bruce Levine, is biased against investors that file complaints. Painter, 83, claims that Levine has a secret deal with former CFTC Chairwoman Wendy Gramm that he would never issue a ruling that favored a complainant.

Painter made these allegations as he was preparing to retire. He is one of two administrative law judges that preside over investor complaints at the CFTC. He requested that his pending cases not be assigned to Levine.

Painter says that Levine makes pro se complainants endure a “hostile procedural gauntlet" until eventually, they are willing to withdraw their case or “settle for a pittance." Levine has not commented on the allegations. However, according to a Wall Street Journal story that was published 10 years ago, Levine has never ruled in favor of an investor.

Painter is recommending that the CFTC bring in another administrative judge. He has six cases pending before him. Their total claims exceed $1 million.

Stockbroker Fraud Lawyer William Shepherd said, "We have been suspect of commodities reparations proceedings for some time, but WOW!” Shepherd noted. "Other avenues are available, including commodities arbitration and court in Chicago. Some cases may also be decided in securities arbitration when the participants are dually licensed. It is essential that an aggrieved investor hire a law firm with experience, including the knowledge of how to choose the most appropriate forum."

Meantime, the WSJ is reporting that Painter issued rulings at the CFTC while his wife was battling alcoholism and mental illness and that he did so as recently as February. In August, a psychiatrist wrote that the judge was suffering from a “profound” disability that has rendered him unable to make responsible decisions. His wife, CFTC lawyer Elizabeth Ritter, is seeking guardianship over him. The couple are in the middle of a divorce. The judge’s attorney denies that his client is suffering from Alzheimer’s.

Case Sheds Light on Judge, The Wall Street Journal, October 21, 2010

Commodity Futures Trading Commission judge says colleague biased against complainants, The Washington Post, October 19, 2010

Commodities Future Trading Commission

Continue reading "CFTC Judge Says Colleague Biased Against Investors with Complaints" »

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Posted In: CFTC

June 14, 2009

Texas Securities Fraud: A Houston Attorney and a Texas A & M Professor Charged with Investment Fraud

The US Securities and Exchange Commission and the Commodity Futures Trading Commission are accusing Houston attorney and accountant Daniel Petroski and Texas A & M Professor Robert Watson of using forged bank records to engage in investor fraud. On May 21, the US District Court for the Southern District of Texas froze the assets of the two men and of two firms associated with the alleged misconduct.

According to the two agencies, Petroski and Watson raised over $19 million from about 65 investors, while claiming they would use a foreign-currency trading software, “Alpha One,” that they said belonged to their company, Private FX Global One Ltd. Watson’s “deal clearing company, “36 Holdings,” was also to participate in the investing.

The SEC and the CFTC contend that the two men engaged in misrepresentation when they made it appear as if their foreign exchange trading business never had a losing month, achieved a yearly return of over 23%, and that their venture had millions of dollars in Swiss and US bank accounts. The two agencies are also accusing the two men of generating bogus records for investigators, including records indicating that 36 Holdings had an account with Deutsche Bank where Global One earned over $2 million this year by trading foreign currencies. In fact, 36 Holdings does not have a Deutsche Bank account.

In addition, the SEC’s complaint accuses the two men of putting, at maximum, 33% of their proceeds in a Swiss bank before transferring some $5 million to a Houston bank—even though they told investors that the amount of foreign currency and other assets was closer to 80%. The defendants are also accused of giving their own employees bogus Swiss bank statements and making false claims that 36 Holdings had nearly $70 million deposited there.

The SEC accuses the defendants of violating the Securities and Exchange Act of 1934’s Section 10(b), Rule 10b-5 thereunder, and the Securities and Exchange Commission Act of 1933’s Section 17(a). The CFTC and the SEC are seeking a preliminary injunction, final judgment from permanent enjoinment of future violations, disgorgement with interest, and fines.

Related Web Resources:
SEC OBTAINS ASSET FREEZE AND TEMPORARY RESTRAINING ORDER AGAINST ROBERT D. WATSON, DANIEL J. PETROSKI, PRIVATEFX GLOBAL ONE LTD., SA AND 36 HOLDINGS, LTD., SEC.gov, May 26, 2009

Read the SEC Complaint (PDF)

Continue reading "Texas Securities Fraud: A Houston Attorney and a Texas A & M Professor Charged with Investment Fraud" »

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Posted In: CFTC , SEC Enforcement , Securities Fraud , Texas Securities Fraud

September 15, 2008

Rosenthal Collins Group LLC Settles CFTC Charges Over Failure to Enforce Compliance and Supervisory Procedures

Rosenthal Collins Group LLC has reached an agreement to settle Commodity Futures Trading Commission charges that it neglected to properly supervise employees and enforce compliance procedures. The futures commission merchant says it will pay $310,000 to settle the charges for violations that the CFTC says took place for over two years, between April 2003 and December 2005.The company also agreed to monitor and enforce its compliance rules in the future.

According to RCG’s compliance rules and procedures, issuing third party checks was prohibited unless the Compliance Department approved the checks or they were used to pay for a customer’s business expenses. The approval of the company’s compliance department was also required for any cash payments to customers.

The CFTC says that RCG did disburse cash to someone that worked for a New York Mercantile Exchange floor brokerage operation even though the worker was not an account holder that had been authorized to receive cash from the account. The futures commission merchant also disbursed a number of checks to third parties while failing to obtain the proper approval.


Related Web Resources:

CFTC Sanctions Rosenthal Collins Group, LLC $310,000 for Failing to Enforce Compliance Procedures and Diligently Supervise Employees, CFTC.gov, August 26, 2008

Rosenthal Collins Group, LLC

Continue reading "Rosenthal Collins Group LLC Settles CFTC Charges Over Failure to Enforce Compliance and Supervisory Procedures" »

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Posted In: CFTC

October 15, 2007

Interactive Brokers LLC Sanctioned for Failing to Supervise Its Compliance Staff

The U.S. Commodity Futures Trading Commission (CFTC) ordered Interactive Brokers LLC (IBL) to relinquish $175,000 in commissions, for failing to properly supervise its compliance employees while handling a commodity futures trading account. The National Futures Association (NFA) recently fined IBL $125,000 regarding the same matter and for failing to maintain adequate books and records.

IBL is a discount direct access brokerage firm and registered futures commission merchant (FCM) headquartered in Greenwich, Connecticut. According to the order, an account was maintained at IBL in the name of Kevin Steele, a Canadian who used the account to defraud more than 200 Canadian, German, and US citizens of over $8 million in a commodity pool fraud that was the subject of an earlier CFTC enforcement action.

The CFTC found that, from February 2003 through May 2005, IBL accepted 135 third-party deposits in the form of wire transfers and checks totaling $7.7 million into Steele’s personal account, but did not have procedures reasonably designed to detect the deposit of third-party funds in an individual trading account. The frequency and magnitude of deposits and withdrawals to Steele’s account, relative to his stated liquid net worth, and the pattern of deposits followed by withdrawals suggested that Steele might be operating as an unregistered commodity pool operator.

IBL compliance staff telephoned Steele on several occasions to inquire about the trading activity in his account. Yet, IBL’s compliance staff each time accepted Steele’s explanations as reasonable without conducting any additional or independent inquiries. The order states that IBL’s procedures for determining the source of funds received through wire transfers were inadequate to meet its supervisory responsibilities.

The ability to determine if funds in customer accounts are coming from someone other than the account holder is a necessary part of an FCM's supervisory system. If an FCM fails to monitor the source of funds being deposited into customer accounts at the time such funds are received, its ability to detect illegal activity such as pool fraud or money laundering is impaired.

Shepherd Smith and Edwards represents investors nationwide in claims against financial firms. We have represented investors in more than 1,000 cases. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.

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Posted In: CFTC , Interactive Brokers LLC

April 9, 2007

Commodities Regulators Accuse Firms of Misrepresenting Public

The Commodity Futures Trading Commission filed enforcement actions in the U.S. District Court for the Southern District of New York March 22 against nine firms with names identical to or extremely close to those of legitimate firms and exchanges. The actions accuse the firms of fraud while soliciting customers to purchase commodity futures and options contracts (CFTC v. American Futures and Options Exchange, S.D.N.Y., No. 07-CV-2377, 3/22/07; AFTC v. International Energy Exchange, S.D.N.Y., No. 07-CV-2378, 3/22/07; CFTC v. New York Petroleum Option Exchange, S.D.N.Y., No. 07-CV-2379, 3/22/07; CFTC v. New York Options Exchange, S.D.N.Y., No. 07-CV-2376, 3/22/07).

The CFTC also stated that the defendants used misrepresentations on their Web sites to defraud the public out of millions of dollars. Customers were solicited to trade futures and options on energy and currency. In reality, however, the defendants actually invented phony exchanges and brokers to deceive clients.

Those charged--some of which share the names of legitimate firms--are New York Options Exchange (NYOEX); Tahoe Futures; International Energy Exchange (INTENX); Vitol Capital Management; New York Petroleum Option Exchange (NYPOE); HPR Commodities; American Futures and Options Exchange; Metro Financials; and American Futures and Options Trading Commission (AFOTC).

The allegations include that Tahoe, Vitol, HPR, and Metro leased the use of fax numbers with U.S. area codes to fool the public into thinking all the companies were America-based. INTENX, NYOEX, and NYPOE were touted as futures exchanges, and AFOTC as the industry's regulator. All are fictitious.

Posted by Shepherd Smith Edwards & Kantas LTD LLP | | Email This Post

Posted In: CFTC

March 29, 2007

U.S. Senator Durbin Wonders Whether Smaller Budget Can Satisfy the Commodity Futures Trading Commission’s Urgent Needs

At a hearing discussing the budgetary needs of the Commodity Futures Trading Commission, Senator Richard Durbin voiced concerns that President Bush’s 2008 budget request for the CFTC would not be enough to meet the regulatory agency’s key needs to allow it to function effectively. Durbin, the chairman of the Senate Appropriations Financial Services and General Government Subcommittee, also said that he was worried that staffing problems and older computer systems at the CFTC could negatively affect is ability to supervise the surging derivates industry.

At the hearing, Durbin addressed CFTC Chairman Richard Jeffrey, telling him that he had observed agency’s problems with developing technology to keep up with market changes and its struggles with staffing levels. Durbin said that he believed the agency needed the right tools to enforce the laws.

Jeffrey has complained that agency’s staff size had dropped over the past several years and its computers had become out of date, even as trade volume has increased. He said the $116 million request by President Bush—18 million more than what Congress had allotted to the agency for fiscal year 2007—would help “modestly increase our capabilities in certain areas,” but that this amount of financial support needed to be seen as a beginning, not the end attempt, to addressing certain problems the agency had been experiencing.

Jeffrey attributed employee retirement, attrition, and paying for pay parity as reasons for the staff decrease. The CFTC is required to pay staff the same as other federal financial oversight agencies but is now only paying 70-75% of what peer agencies pay their staffers. He also pointed out that the agency’s trade practices and market oversight—two of three critical surveillance technology systems—could become “antiquated.” He said that $17 million of the budget request will be allotted to technology upgrades, but that this would not be enough to modernize current systems.

CFTC figures say that the agency had 546 staffers overseeing trading volume of 500 million contracts each year in 2000. The volume had grown five times in 2006 to about 2.5 billion contracts ($5 trillion in trading each day) but staffing levels had decreased to 498. Staffing is expected to decrease further in 2007, while contract volume is expected to grow to $3 billion.

Durbin pointed out that although CFTC staffing levels continued to go down in the last 10 years, the number of employees at the SEC had grown by more than 70% during the same time period.

Shepherd Smith and Edwards is a law firm committed to helping investors recuperate the investment losses they have incurred because of the unacceptable actions of stockbrokers and their firms. If you are one of these investors, please contact Shepherd Smith and Edwards today and we will provide you with a free consultation. We have helped thousands of investors recover their losses.

Related Web Resources:

Concern grows over budget for CFTC regulation, MSNBC.com, March 11, 2007

Commodity Futures Trading Commission

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Posted In: CFTC

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