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Entries in cftc (8)

Tuesday
Apr232013

Wisconsin Man Who Duped Father and Brother in $5.3 Million Ponzi Scheme Ordered to Pay $5 Million in Penalties

The U.S. Commodity Futures Trading Commission announced it had obtained an order requiring a Wisconsin man to pay restitution and a fine exceeding $5 million for operating a Ponzi scheme that counted his own family among the victims.  Eric N. Schmickle, 37, was ordered to pay the penalties as part of a CFTC enforcement action that accused Schmickle of operating a commodity-based Ponzi scheme that raised more than $5 million from investors.  Schmickle was also criminally charged in connection with the scheme, and was sentenced to a three-year term last month. 

According to authorities, Schmickle promised to trade commodity futures contracts through his companies, Q Wealth Management and Aquinas.  Friends and family members, including Schmickle's father and brother, gave him $300,000 to start in 2009, with the understanding that Schmickle would be entitled to 25% of any investment profits.  Schmickle promised investors he would achieve substantial gains, which attracted additional investors that subsequently contributed over $4 million.  However, these promises of lucrative gains were untrue, and Schmickle was far from the successful trader he claimed to be.  In fact, rather than 25% gains, Schmickle instead racked up trading losses that exceeded $3 million.  Schmickle also misappropriated investor funds for his own personal expenses, and only several thousand dollars remained when the scheme was uncovered.

Schmickle plead guilty to a single count of wire fraud in July 2012, and his plea agreement called for him to pay approximately $3 million in restitution to victims.  While federal sentencing guidelines called for a sentence ranging from 57 to 71 months, the federal judge tasked with sentencing Schmickle chose to make a downward departure from the recommendation.  

Thursday
Oct202011

CFTC Obtains Consent Order in $14 Million Forex Ponzi Scheme

The U.S. Commodity Futures Trading Commission announced it had obtained a consent order imposing permanent trading and registration bans against a California man and two companies along with civil monetary penalties totalling nearly $7 million.  Scott Bottolfson and Spirit Investments, Inc. ("Spirit"), both of Encinitas, Calif., and Increase Investments, Inc. ('Increase") of Reno, Nev. were originally named in January 2011 in a CFTC enforcement action charging them with operating a $14 million commodity pool Ponzi scheme.  The consent order, signed by United States District Judge Anthony J. Battaglia, found Bottolfson and his two companies in violation of several provisions of the Commodity Exchange Act.

From 2002 until August 2010, Bottolfson solicited investors to trade commodity futures in two commodity pools, through his companies, Increase and Spirit.  Potential investors were provided with false and/or misleading statements to induce their investment, including the guaranty of a twenty percent return on their investment and that investments were risk-free.  In total, Bottolfson raised approximately $14 million from thirty investors.  Of that $14 million, less than $3 million was placed into commodity pool trading accounts.  $7 million was returned to investors in the form of purported interest payments, and investors suffered the loss of approximately $7 million in principal.  Bottolfson also misappropriated investor funds for his own use.  

The enforcement action is the latest in a record-breaking year for the CFTC, which recently stated that it had filed 99 enforcement actions during Fiscal year 2011, a 74% increase from the previous year.  During that period, the CFTC obtained orders imposing over $290 million in civil monetary penalties, and more than $160 million was ordered in restitution and disgorgement. Each of these sanctions was also more than double the previous year's amount.  

A copy of the Consent Order is here.

Saturday
Oct152011

Hawaii Woman "Bestowed by Jesus to Trade Commodities" Sentenced to Prison for $1 Million Ponzi Scheme

A Hawaii woman who told investors that she had been "bestowed by Jesus Christ to with the ability to trade commodities", but instead operated a Ponzi scheme, was sentenced to federal prison on Friday.  Kapua Keolanui, 36, was sentenced to thirty-three months in federal prison by United States District Judge David Ezra, who called her behavior callous and also ordered her to pay nearly $900,000 in restitution to her victims.  Keolanui, who had previously pled guilty to one count of wire fraud, was sentenced to the maximum sentence under federal sentencing guidelines.  Wire fraud carries a maximum sentence of up to twenty years in federal prison.  

The scheme derives out of Keolanui's association with Rachelle and Perry Griggs, who were recently sentenced to prison for masterminding the scheme.  Previous Ponzitracker coverage of the Griggs is here.  Perry Griggs became associated with Keolanui's husband when both were incarcerated; ironically, Perry Griggs was serving time for his role in a previous Ponzi scheme.  Through his relationship with Keolanui's husband, Perry Griggs convinced Keolanui to form Paradise Trading, LLC with Rachelle Griggs in late 2006.  Keolanui then solicited friends and family, telling them that she had been given the gift of finding money by Jesus Christ.  In total, six different individuals gave Keolanui over $1 million to invest.  Instead of using the money to invest, Keolanui funnelled some of the money to Aloha Trading, which was Perry Grigg's operation that he was running from behind prison walls.  When Grigg's scheme was uncovered, nearly all of the victims' money had disappeared.  

Keolanui was scheduled to report to prison on November 28, 2011.  She was also ordered to three years of probation upon release from prison.  

A copy of the Complaint filed against Griggs and Aloha Trading by the U.S. Commodity Futures Trading Commission is here.

Sunday
Oct092011

Guilty Plea Expected in $40 Million Forex Ponzi Scheme

A North Carolina man is expected to plead guilty this week to charges that he participated in a $35 million foreign currency trading Ponzi scheme.  Court records indicated that a change of plea hearing is currently scheduled on October 12 for Bryan Keith Coats, of Clayton, North Carolina.  Coats and several companies he operated were named in a January 2011 complaint filed by the Commodity Futures Trading Commission ("CFTC"), a foreign currency regulator.  Criminal charges followed, and Coats faced charges of investment fraud and money laundering.  Money laundering carries a maximum prison sentence of twenty years in federal prison, along with a fine of the greater of (1) $500,000 or (2) twice the value of property involved in the transaction.

According to the complaint filed by the CFTC, the scheme started in April 2007, when Coats, along with defendants Keith Simmons and Deanna Salazar, solicited customers to invest in various entities operating as Black Diamond Capital Solutions, LLC and Black Diamond Holdings.  Potential customers were told that Black Diamond operated a sophisticated forex trading system, with three years of experience engaging in highly successful forex trading. Average monthly returns of up to four percent were promised, and investors were assured that trading stop mechanisms were in place and that no more of twenty percent of invested funds were at risk.  In June 2008, Coats established his own hedge fund, Genesis Wealth Management, LLC, through which he solicited customers for Black Diamond.  As a result, at least 240 individuals invested $35 million with Black Diamond.  However, in March 2009, Black Diamond began to refuse principal redemptions and interest payments, providing investors with several false excuses.  Following an investigation by the CFTC, a company principal admitted that Black Diamond "has never traded currency, held brokerage accounts, or advised anyone on currency trades," and utilized hypothetical trading results to calculate the gains customers were supposedly making.  

One of the company executives, Keith Simmons, was arrested in December 2010 and charged with conspiracy to commit money laundering, wire fraud, and securities fraud.  Another, Deanna Salazar, recently pled guilty to charges of investment fraud conspiracy and tax evasion.

A copy of the CFTC Complaint is here.

Tuesday
Oct042011

Five Florida Residents Charged in $1.7 Million Ponzi Scheme

Federal authorities charged five Florida residents, their company, and a sixth Mexican national with operating a $1.7 million Ponzi scheme disguised as a foreign currency trading operation.  The U.S. Commodities and Futures Trading Commission ("CFTC") filed a complaint against Alpha Trade Group S.A., also known as Revolution Network Ltd., of Panama; Jose Cecilio Martinez Beltran, Welinton Bautista Castillo, Maria Alvarez Gutierrez, Yehodiz Padua Valentin, and Maria Asela Rodriguez, all of Orlando; and Francisco Amaury Suero Matos of Mexico.  All were charged with various violations of anti-fraud provisions of the Commodity Exchange Act.  The CFTC is seeking relief including a ban of engaging in commodities-trading operations, disgorgement of ill-gotten gains, restitution to victims, and civil monetary penalties.

The Defendants, through Alpha Trade Group a/k/a Revolution Network Ltd. ("ATG"), solicited approximately $1.7 million from investors for placement in various commodity trading pools, including Orsa Investment Group and Online Marketing Solutions.  According to ATG, investor funds would be used to trade foreign currency and commodity futures contracts.  Potential investors were told that their investment was risk-free, and were guaranteed monthly returns ranging from 12.5% to 25%.  Investors were provided with promissory notes in exchange for their investment, and also received fictitious account statements on ATG's website showing the purported returns.  Yet, according to authorities, no commodities trading occurred in the United States, and only a small fraction of investor funds were sent to a third-party to engage in commodities trading.  Nearly $750,000 was issued back to investors in the form of investment returns or principal withdrawals, and the remainder is alleged to have been misappropriated by the defendants.  

The U.S. Department of Justice previously initiated a civil forfeiture action seeking the return of obtained approximately $316,000 in funds traceable to wire fraud offenses.  On July 27, 2010, a court entered a judgment and ordered the forfeiture of the funds, which were then returned to defrauded investors.

A copy of the CFTC Complaint is here.