DALLAS-BASED COMMODITY POOL FRAUDSTER PERMANENTLY BANNED FROM COMMODITIES TRADING

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Federal Court in Texas Orders Dallas-based Steven Lyn Scott to Pay $766,625.30 in Restitution and a $700,000 Penalty to Settle Charges of Solicitation Fraud, Misappropriation, and Registration Violations in Connection with a Forex Commodity Pool Scheme

The Court earlier entered a Consent Order against Scott, permanently banning him from the commodities industry

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that the U.S. District Court for the Northern District of Texas issued a supplemental Consent Order of Permanent Injunction requiring Defendant Steven Lyn Scott (a/k/a Stevon Lyn Scott) of Dallas, Texas, to pay a $700,000 civil monetary penalty (CMP) and restitution of $766,625.30, plus post-judgment interest on both the CMP and restitution obligation. An earlier Consent Order of the Court, entered on May 5, 2014, imposes a permanent trading and registration ban against Scott and prohibits him from violating provisions of the Commodity Exchange Act (CEA) and CFTC regulations, as charged. Scott has never been registered with the CFTC in any capacity.

The Court’s Orders stem from a CFTC enforcement action charging Scott with solicitation fraud, misappropriation of customer funds, and registration violations in connection with operating a fraudulent commodity pool scheme (see CFTC Press Release 6885-14, March 20, 2014).

The Court finds that, from at least January 5, 2009 and through at least March 30, 2011, Scott fraudulently solicited at least $1,146,000 from 43 pool participants to participate in pooled investment vehicles to trade in off-exchange agreements, contracts, or transactions in foreign currency (forex) on a leveraged or margined basis.  Scott, directly and by word of mouth, solicited pool participants located in Texas and solicited at least some pool participants by email.  Pool participants included Scott’s friends, family members, and other members of the general public.

Specifically, according to the May 5, 2014 Order, Scott solicited pool participants to participate in pooled investment vehicles in the name of an entity he owned and controlled, Stewardship Financial Exchange, Inc.  In his solicitations, Scott guaranteed monthly returns between two percent and five percent to pool participants who entered into six-month contracts, purportedly generating such returns by pooling participants’ funds and trading in off-exchange forex transactions on a leveraged or margined basis.

However, the Order finds that instead of trading pool participants’ funds, Scott misappropriated a portion of pool participants’ funds by depositing their funds into his personal and corporate bank accounts and then using the funds for personal expenses.  Scott also misappropriated pool participant funds by trading them in his personal trading accounts and by using them to pay purported interest and principal to pool participants in the manner of a Ponzi scheme.

In soliciting actual and prospective customers, the Order finds, Scott omitted material facts, including but not limited to the fact that (1) pool participant funds were misappropriated; (2) the pools did not have any trading accounts in their names; (3) Scott was paying purported interest and principal with his own funds and with the funds of other pool participants in the manner of a Ponzi scheme; and (4) Scott was acting as a Commodity Pool Operator without being registered as such, as required by the CEA and CFTC Regulations.  Scott’s omissions were material and operated as a fraud or deceit upon pool participants.

The CFTC cautions pool participants that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC thanks the Office of the U.S. Attorney for the Northern District of Texas for its assistance in this matter.

CFTC Division of Enforcement staff members responsible for this case are Jason Mahoney, George Malas, Michael Amakor, Timothy J. Mulreany, and Paul Hayeck.

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CFTC’s Foreign Currency (Forex) Fraud and Commodity Pool Fraud Advisories

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.

The CFTC has also issued a Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

CFTC OBTAINS DEFAULT JUDGEMENT AGAINST TEXAS CORPORATION FOR FRAUD INVOLVING FOREIGN FOREIGN CURRENCY CONTRACTS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

CFTC Obtains Default Judgment against Texas-Based Financial Robotics, Inc. for Fraudulent Forex Scheme

Federal Court Orders Defendant to Pay More than $3 Million in Restitution and a Monetary Penalty in CFTC Anti-Fraud Action

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Lee H. Rosenthal of the U.S. District Court for the Southern District of Texas entered an Order of default judgment and permanent injunction against Defendant Financial Robotics, Inc. (FinRob), a Texas corporation. The court’s Order requires FinRob to pay restitution of $827,000 and a civil monetary penalty of $2,481,000. The Order also imposes permanent trading and registration bans against FinRob and prohibits it from violating provisions of the Commodity Exchange Act, as charged.

The Order, entered on October 9, 2014, stems from a CFTC Complaint filed on June 29, 2011 (see CFTC Press Release 6067-11). The Order finds that, from at least June 2008, FinRob, and its controlling person, Defendant Mark E. Rice, operated a fraudulent scheme that solicited approximately $1.7 million from one individual to trade leveraged off-exchange foreign currency contracts. According to the Order, Defendants falsely told their customer, among other things, that his investment was “risk free” and insured against loss and that the return of his principal was guaranteed. The Order further finds that Defendants misappropriated at least $576,000 of customer funds by transferring the money to unrelated Rice-controlled companies, and thereafter spending at least $404,000 of those funds for Rice’s personal and business expenses.

CFTC Previously Settled with Defendant Rice

Previously, on January 13, 2014, the court entered a Consent Order of permanent injunction against Defendant Rice, requiring him to pay a combined total of $1.5 million in restitution and a civil monetary penalty, among other sanctions, to settle the CFTC action (see CFTC Press Release 6828-14).

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC thanks the National Futures Association, the British Virgin Islands Financial Services Commission, the Netherlands Authority for the Financial Markets, and the United Kingdom’s Financial Conduct Authority for their assistance.

CFTC Division of Enforcement staff members responsible for this case are Kevin Webb, Michelle Bougas, James Holl, III, and Gretchen L. Lowe.

OWNER TRADING COMPANY PLEADS GUILTY TO DEFRAUDING INVESTORS OF OVER $30 MILLION

FROM:  SECURITIES AND EXCHANGE COMMISSION 
Former Owner of a Massachusetts-Based Trading Company Pleads Guilty to Multi-Million Dollar Fraud Scheme

The Securities and Exchange Commission announced today that on March 7, 2014, the former owner of Massachusetts-based Boston Trading and Research, LLC (BTR), pled guilty to charges stemming from his role in an investment scheme that defrauded more than 1,000 investors out of more than $30 million.

Craig A. Karlis, 53, of Hopkinton, MA, pled guilty before U.S. District Court Senior Judge Mark L. Wolf, to nine counts of wire fraud and two counts of filing false tax documents.  His sentencing is currently scheduled for June 2, 2014 at 3:00 p.m.  His business partner, Ahmet Devrim Akyil, 41, formerly of Hingham, MA, was charged with 10 counts of wire fraud.  According to a March 7, 2014 press release issued by the United States Attorney’s Office for the District of Massachusetts (USAO), Akyil left the United States for Turkey in 2009 and remains a fugitive.  The USAO unsealed an indictment charging Karlis and Akyil with criminal violations on October 28, 2010.

Also on October 28, 2010, the Commission filed a civil injunctive action in federal district court in Massachusetts against BTR, and its principals Ahmet Devrim Akyil and Craig Karlis for fraudulently raising millions of dollars from investors in a purported foreign currency (Forex) trading venture. Among other things, the Commission alleges that the defendants misappropriated some investor funds and lost the vast majority of remaining investor funds through Forex trading activity after promising investors that most of their funds were protected from such trading losses.

According to the Complaint, BTR collapsed in September 2008 due to significant losses accrued as a result of concealed trading far past the stop loss limits promised to investors. Ultimately, BTR distributed the remaining funds, which accounted for only approximately 10% of account balances, to its investors.

The Commission’s complaint, which is pending, alleges that BTR, Akyil, and Karlis violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against BTR, Akyil, and Karlis.

WOMAN AND COMPANIES CHARGED IN MULTIMILLION DOLLAR FOREX SCHEME

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Charges Melody Nganthuy Phan of California and Her Companies, My Forex Planet, Inc., Wal Capital, S.A., and Top Global Capital, Inc., with Operating a Fraudulent $3.7 Million Off-Exchange Forex Scheme

The CFTC also Charges Melody Nganthuy Phan with Fraud by an Unregistered Commodity Pool Operator

Washington, DC - The US Commodity Futures Trading Commission (CFTC) filed a civil enforcement action charging Defendants Melody Nganthuy Phan (Phan) of California and her companies, My Forex Planet, Inc. (MFP), Wal Capital, S.A. (Wal Capital), and Top Global Capital, Inc. (TGC) with operating a fraudulent off-exchange foreign currency (forex) scheme. The CFTC Complaint also charges Phan with fraud by an unregistered commodity pool operator. The scheme allegedly fraudulently solicited at least $3,764,214 from over 174 customers and misappropriated customer funds in an effort to perpetuate the fraud.

Specifically, the Complaint alleges that, from at least January 2009 and through February 2011, Phan, Wal Capital, and TGC, through MFP, used forex training classes to directly and indirectly solicit actual and prospective clients to open self-traded forex accounts at Wal Capital and pooled forex trading at TGC. During the forex trading classes given by MFP, Defendants falsely stated, among other things, that 1) Phan was a highly successful forex trader who had made millions of dollars trading forex, 2) Phan’s forex trading system, which was taught in MFP classes, was a very safe system that virtually guaranteed profit over time, and 3) money deposited by Defendants’ customers would be used for its intended purpose. The Complaint alleges that all of these representations to clients were false. In fact, Phan lost over $1.4 million trading forex in multiple accounts in her name or under her control, according to the Complaint.

Additionally, the Complaint alleges that Defendants used customer funds for unauthorized purposes, such as paying other customer withdrawals, as well as business expenses such as radio ads and marketing.

The CFTC Complaint seeks restitution, civil monetary penalties, restitution, trading and registration bans, and a permanent injunction prohibiting further violations of the federal commodities laws, as charged.

The CFTC greatly appreciates the assistance of the UK Financial Conduct Authority.

CFTC Division of Enforcement Staff members responsible for this case are Alison Wilson, Maura Viehmeyer, Boaz Green, Heather Johnson, James H. Holl, III, and Rick Glaser.

RUSSIAN BANK PRESIDENT ORDERED BY CFTC TO PAY $250,000 TO SETTLE FALSE STATEMENT CHARGES

FROM:   COMMODITY FUTURES TRADING COMMISSION 

January 2, 2014

CFTC Orders President of a Russian Bank, Artem Obolensky, to Pay $250,000 Penalty to Settle Charges of Making False Statements to the CFTC During an Investigation

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order requiring foreign national Artem Obolensky of Moscow, Russia, to pay a $250,000 civil monetary penalty for making false and misleading statements of material fact to CFTC staff in an interview during a CFTC Division of Enforcement investigation. The Order enforces the false statements provision of the Commodity Exchange Act (CEA), which was added by the Dodd-Frank Act.

Obolensky is President of a Russian bank and co-owner of a private investment fund located in Cyprus that both trade foreign currency futures and options on the Chicago Mercantile Exchange, according to the Order. The CFTC Order finds that Obolensky knowingly made false and misleading statements to CFTC staff on October 13, 2011, regarding a trade in March 2012 Japanese Yen call options contracts between these entities.

According to the Order, Obolensky said: “The two entities pursue different strategies. Pure coincidence that the trades crossed. Very isolated when viewed in the context of all of the trades the bank has placed in markets over the years.”

However, the Order finds that the two entities traded opposite each other more than 182 times and modified their orders repeatedly to ensure that they would match. The Order also finds that Obolensky made the trading decisions for the accounts that traded opposite each other so he knew that the trade CFTC staff asked him about was not a “pure coincidence” or “very isolated.”

CFTC Division of Enforcement Acting Director Gretchen Lowe commented: “Witnesses in CFTC investigations must tell the truth. If they do not, the CFTC will not hesitate to take action to enforce the Dodd-Frank’s prohibition against providing false or misleading information and impose sanctions.”

In addition to the $250,000 civil monetary penalty, the CFTC Order requires Obolenksy to cease and desist from violating the relevant provision of the CEA.

The CFTC Division of Enforcement staff members responsible for this matter are Susan Gradman, Joseph Patrick, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

SEC CHARGES INVESTMENT ADVISER IN ALGORITHMIC TRADING ABILITY CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Charges North Carolina-Based Investment Adviser for Misleading Fund Board About Algorithmic Trading Ability
08/21/2013 10:43 AM EDT

The Securities and Exchange Commission today announced charges against a North Carolina-based investment adviser and its former owner for misleading an investment fund’s board of directors about the firm’s ability to conduct algorithmic currency trading so they would approve the firm’s contract to manage the fund.

The SEC’s Enforcement Division alleges that Chariot Advisors LLC and Elliott L. Shifman misled the fund’s board about the nature, extent, and quality of services that the firm could provide as he touted the competitive benefits of algorithmic trading in two presentations before the board.  Contrary to what Shifman told the directors, Chariot Advisors did not devise or otherwise possess any algorithms capable of engaging in the currency trading that Shifman was describing.  After the fund was launched, Chariot Advisors did not use an algorithm model to perform the fund’s currency trading as represented to the board, but instead hired an individual trader who was allowed to use discretion on trade selection and execution.  The misconduct by Shifman and Chariot Advisors caused misrepresentations and omissions in the Chariot fund’s registration statement and prospectus filed with the SEC and viewed by investors.

The case arises out of an initiative by the SEC Enforcement Division’s Asset Management Unit to focus on the “15(c) process” – a reference to Section 15(c) of the Investment Company Act of 1940 that requires a registered fund’s board to annually evaluate the fund’s advisory agreements.  Advisers must provide the board with the truthful information necessary to make that evaluation.  Other enforcement actions taken against misconduct in the investment contract renewal process and fee arrangements include cases against Morgan Stanley Investment Management, a sub-adviser to the Malaysia Fund, and two mutual fund trusts affiliated with the Northern Lights Variable Trust fund complex.

“It is critical that investment advisers provide truthful information to the directors of the registered funds they advise,” said Julie M. Riewe, Co-Chief of SEC Enforcement Division’s Asset Management Unit.  “Both boards and advisers have fiduciary duties that must be fulfilled to ensure that a fund’s investors are not harmed.”

According to the SEC’s order instituting administrative proceedings, the false claims by Chariot and Shifman defrauded the Chariot Absolute Return Currency Portfolio, a fund that was formerly within the Northern Lights Variable Trust fund complex.  In December 2008 and again in May 2009, Shifman misrepresented to the Chariot fund’s board that his firm would implement the fund’s investment strategy by using a portion of the fund’s assets to engage in algorithmic currency trading.  Chariot fund’s initial investment objective was to achieve absolute positive returns in all market cycles by investing approximately 80 percent of the fund’s assets under management in short-term fixed income securities, and using the remaining 20 percent of the assets under management to engage in algorithmic currency trading.

According to the SEC’s order, Chariot Advisors did not have an algorithm capable of conducting such currency trading.  The ability to conduct currency trading was particularly significant for the Chariot fund’s performance, because in the absence of an operating history the directors focused instead on Chariot Advisors’ reliance on models when the board evaluated the advisory contract.  Even though Shifman believed that the fund’s currency trading needed to achieve a 25 to 30 percent return to succeed, Shifman never disclosed to the board that Chariot Advisors had no algorithm or model capable of achieving such a return.

According to the SEC’s order, because Chariot Advisors possessed no algorithm, currency trading for the fund was under the control of an individual trader who was not using an algorithm for at least the first two months after the fund’s launch.  Shifman had interviewed the trader prior to her hiring and knew that she used a technical analysis, rules-based approach for trading that combined market indicators with her own intuition.  The trader traded currencies for the fund until Sept. 30, 2009 when she was terminated due to poor trading performance. Subsequently, Chariot employed a third party who utilized an algorithm to conduct currency trading on behalf of the Chariot fund.

The SEC’s order alleges that the misconduct by Chariot and Shifman, who lives in the Raleigh area, resulted in violations of Sections 15(c) and 34(b) of the Investment Company Act of 1940 and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8.  A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the order are true and whether any remedial sanctions are appropriate.

The SEC’s investigation was led by Stephen E. Donahue and John G. Westrick of the Asset Management Unit and Atlanta Regional Office as well as Micheal D. Watson of the Atlanta office.  Pat Huddleston and Shawn Murnahan will lead the Enforcement Division’s litigation.  John Sherrick and Timothy J. Barker of the Atlanta Regional Office conducted the related examination that led to the investigation.

OWNER AND COMPANY ORDERED TO PART WITH $9.3 MILLION IN CFTC ANTI-FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION
Federal Court in Texas Orders Robert Mihailovich, Sr. and Growth Capital Management LLC to Pay over $9.3 Million in CFTC Anti-fraud Action
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained an order of permanent injunction against defendants Robert Mihailovich, Sr. (Mihailovich, Sr.) of Rockwall, Texas, and Growth Capital Management LLC (GCM) requiring Mihailovich, Sr. and GCM to make restitution to defrauded customers, disgorge ill-gotten gains, and pay a civil monetary penalty together, totaling over $9.3 million for fraudulently soliciting over $30 million from customers to trade commodity futures contracts and foreign currency (forex). The order also imposes permanent trading and registration bans against the defendants.

The court’s order, entered on June 26, 2012, arises out of a CFTC complaint filed on July 27, 2010, against Mihailovich, Sr., GCM, and Robert Mihailovich, Jr. (Mihailovich, Jr.), Mihailovich, Sr.’s son. As alleged in the complaint, Mihailovich, Sr. was convicted and incarcerated on federal wire fraud charges, served 27 months, and while on a three-year supervised release, fraudulently solicited and accepted more than $30 million from approximately 93 customers to open managed trading accounts. The complaint also alleged that Mihailovich, Jr., at the time of GCM’s initial registration, failed to disclose Mihailovich, Sr.’s involvement with GCM, and failed to disclose in CFTC registration filings that his father was a controlling principal of GCM.

Previously, the federal court had entered an order of default judgment against GCM on March 15, 2011. The federal court later also entered an order of default judgment against Mihailovich, Sr. on November 22, 2011, as a sanction for discovery violations.

The federal court’s June 26, 2012, order finds that during discovery Mihailovich, Sr. engaged in a pattern of willfulness and bad faith. Mihailovich, Sr. failed to attend a number of court-ordered hearings, repeatedly failed to abide by court orders, failed to communicate with plaintiff CFTC, failed to appear or respond to his scheduled deposition, and failed to respond to written discovery requests, according to the order.

The June 26, 2012 order imposes sanctions against Mihailovich, Sr. and GCM arising out of the prior default judgments against them. The order requires Mihailovich, Sr. and GCM jointly and severally to pay $3,475,112 in restitution, to disgorge $389,006 in ill-gotten gains, and to pay a civil monetary penalty of $5,440,000. The order also permanently prohibits the defendants from violating the Commodity Exchange Act and CFTC regulations, as charged, and from engaging in certain commodity-related activities, including personal trading and applying for registration or claiming exemption from registration with the CFTC.

The CFTC previously obtained a consent order against Mihailovich, Jr., that imposed a $40,000 civil monetary penalty and banned him from seeking registration with the CFTC for 10 years and from engaging in certain commodity-related activities, including trading, for 5 years.  The CFTC thanks the U.S. Attorney’s Office for the Northern District of Texas, the Securities and Exchange Commission’s Fort Worth Regional Office, and the National Futures Association for their assistance.

CFTC CHARGES WASHINGTON D.C. RESIDENT WITH FOREX CURRENCY TRADING FRAUD

FROM:  U.S. COMMODITY AND EXCHANGE COMMISSION
CFTC Charges Washington, DC, Resident Marina Bühler-Miko and Her Company, Coventry Asset Managers, LLC, with Operating Fraudulent Forex Scheme

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in U.S. District Court for the District of Columbia against defendants Marina Bühler-Miko(Bühler-Miko) and her company, Coventry Asset Managers, LLC (Coventry), both of Washington, DC.  The CFTC complaint charges that Bühler-Miko and Coventry fraudulently solicited members of the general public to trade off-exchange foreign currency (forex) contracts on a leveraged or margined basis through a pooled investment vehicle, the Coventry Eire Forex Fund (Coventry Eire).  Neither defendant has ever been registered with the CFTC.

The complaint, filed on May 16, 2012, alleges that from at least June 18, 2008, through April 2011, Bühler-Miko and Coventry defrauded customers of at least $300,000 through their scheme.

In soliciting actual and prospective customers, the defendants allegedly made misrepresentations of material facts, including (1) guaranteeing customer profits of six percent quarterly, plus a bonus payment at the end of the 13-month “Asset Management Agreement” by trading forex in Coventry Eire, and (2) downplaying the risk of entering into leveraged forex transactions.

Bühler-Miko, who had no trading experience, admitted in sworn testimony that no customers received the promised quarterly returns or bonus payments and that she ultimately advised each customer that they had lost nearly all of their principal trading forex contracts through Coventry Eire, according to the complaint.

In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act.
CFTC Division of Enforcement staff responsible for this action are Timothy J. Mulreany, Tracey Wingate, Michael Amakor, Paul Hayeck, and Joan Manley.

WALL STREET FIRM CHARGED WITH FOREX FRAUD

Photo:  Currency Sign.  Credit:  Wikimedia
FROM:  COMMODITIES FUTURES TRADING COMMISSION
CFTC Charges New York Firm Madison Dean, Inc., and its Principals, George Athanasatos and Laurence Dodge, with Forex Fraud

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Eastern District of New York charging Madison Dean, Inc. (Madison Dean), of Wantagh, N.Y., and its principals, George Athanasatos, also of Wantagh, and Laurence Dodge of Fresh Meadows, N.Y., with fraudulently soliciting approximately 19 persons to invest approximately $415,000 in managed trading accounts to trade off-exchange foreign currency (forex) contracts on a leverage or margined basis. None of the defendants has ever been registered with the CFTC.

The CFTC complaint, filed on May 8, 2012, alleges that from approximately December 2008 through approximately July 2010, defendants Madison Dean, Athanasatos, and Dodge, through an Internet website, written solicitation materials, and other actions, misrepresented and omitted material facts about Madison Dean, including the background and qualifications of Madison Dean employees and the firm’s performance record, to create a false impression that it was a well-established and successful company.

Specifically, according to the complaint, the defendants allegedly fraudulently claimed that 1) Madison Dean had been in existence since 1998, 2) Madison Dean’s customers included high net worth individuals, financial institutions, and institutional clients, 3) Madison Dean provided “professional money managers” who would be in charge of the forex trading for the customers’ managed accounts, and 4) Madison Dean had been making money for its customers for years.

Contrary to these claims, Madison Dean had not been making money for its customers for years, as it did not exist prior to December 2008, and its customers were “neither high net worth individuals, financial institutional or other institutional clients, hedge funds, nor millionaires,” according to the complaint. Also, according to the complaint, Madison Dean did not have professional money managers in charge of customer trading. Rather, Athansatos allegedly managed the trading of customer accounts, and on various occasions, Dodge and Athanasatos’ mother – neither a professional money manager – also traded customer accounts.

The complaint further alleges that Madison Dean’s customers lost approximately $250,000, “as a result of its poor trading.” As further alleged, after being in operation for a little over a year, during which time the firm collected approximately $112,000 in commissions and fees, Madison Dean shut down its operation with no notice to its customers and no way for those customers to contact the company or anyone associated with it.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the Commodity Exchange Act, as charged.
The CFTC appreciates the assistance of the United Kingdom Financial Services Authority in this matter.

CFTC Division of Enforcement staff members responsible for this case are Alan I. Edelman, James H. Holl, III, Michelle Bougas, Gretchen L. Lowe, and Vincent McGonagle.