COURT ORDERS CALIFORNIA MAN TO PAY MORE THAN $1.6 MILLION IN COMMODITY POOL FRAUD CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court Orders California Man Jeffrey Gustaveson to Pay over $1.6 Million for Fraud, Misappropriation, and False Account Statements in Commodity Pool Scheme

Washington, DC –The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order awarding restitution for defrauded commodity customers and a civil monetary penalty against Defendant Jeffrey Gustaveson of Morgan Hill, California, in connection with a commodity pool investment scheme. The Order requires Gustaveson to pay a civil monetary penalty of $1,230,000 and $410,000 in restitution. The Order also imposes permanent trading and registration bans against Gustaveson and prohibits him from violating the Commodity Exchange Act, as charged.

The Order resolves the CFTC’s Complaint, filed on August 29, 2012, charging Gustaveson with fraud, misappropriation, and issuing false account statements in a multi-million dollar commodity pool scheme (see CFTC Press Release 6341-12).

Magistrate Judge Howard Lloyd of the U.S. District Court for the Northern District of California issued a Report and Recommendation for default judgment and permanent injunction on August 19, 2013, and District Judge Lucy Koh entered an Order adopting Judge Lloyd’s Report and Recommendation on October 23, 2013.

The Order finds that Gustaveson received $2,495,000 from customers to trade commodity futures in a pool. But, rather than trade the pool participants’ funds as promised, Gustaveson used only approximately $400,000 of the funds to trade commodity futures, and he kept at least $400,000 the remaining funds to pay his personal expenses, the Order finds. To conceal his misappropriation, Gustaveson distributed false trading account statements to the pool participants that misrepresented the value of the pool, reported false profits, and failed to disclose his misappropriation of pool participants’ funds. When his fraud was exposed, Gustaveson returned a significant portion of the pool participants’ funds, leaving $410,000 of the customers’ funds unpaid, the Order finds. As to the amount still owed, Gustaveson admitted that he spent the money on personal expenses, past-due taxes, and repaying a previous investor, according to the Order.

CFTC Division of Enforcement staff members responsible for this case are Lindsey Evans, Mary Beth Spear, Diane Romaniuk, Ava M. Gould, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner

COURT ORDERS TRADER TO PAY OVER $7.5 MILLION FOR ROLE IN COMMODITY FUTURES FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 

Federal Court in Illinois Orders Chicago-Based Trader Bradley Scott Schiller to Pay more than $7.5 Million in Restitution and a Civil Monetary Penalty for a Multi-Million Dollar Commodity Futures Fraud

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Thomas M. Durkin of the U.S. District Court for the Northern District of Illinois entered a Consent Order for Permanent Injunction (Order) requiring defendant Bradley Scott Schiller, of Chicago, Illinois, to pay restitution of approximately $4.565 million and a civil monetary penalty of $3 million for commodity futures fraud. The Order also imposes permanent trading and registration bans, among other sanctions.

The Order stems from a CFTC Enforcement complaint filed on May 24, 2012 (see CFTC Press Release 6262-12). The Order finds that from at least January 2008 through approximately May 2012, Schiller fraudulently solicited approximately $7.8 million from at least six investors for trading futures, and that Schiller misappropriated investors’ funds and issued false account statements to customers in order to perpetuate his fraud. According to the Order, Schiller, a former floor broker, told prospective investors that he was a successful trader and showed prospective investors altered account statements to bolster his claims when he was soliciting funds. However, according to the Order, Schiller opened no accounts in the name of his investors, misappropriated approximately $3 million to pay for personal expenses and to re-pay earlier investors and lost approximately $1.6 million in trading in an account in his own name.

The CFTC appreciates the assistance of the U.S. Attorney’s Office, Northern District of Illinois, and the Federal Bureau of Investigation, Chicago Division.

The CFTC Division of Enforcement staff members responsible for this case are Jennifer Diamond, Judith McCorkle, Joseph Konizeski, Scott Williamson, Rosemary Hollinger and Richard B. Wagner.

Last Updated: August 6, 2013

TEXAS RESIDENT TO PAY $17 MILLION FOR ROLE IN FOREIGN CURRENCY FRAUD SCHEME

FROM U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court in Texas Orders Christopher B. Cornett to Pay over $17 Million in Sanctions in Foreign Currency Fraud Action

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order of default judgment and permanent injunction requiring defendant Christopher B. Cornett of Buda, Texas, to pay $10.16 million in restitution and a $6.78 million civil monetary penalty in connection with a foreign currency (forex) pooled investment fraud. The order, entered on August 24, 2012, by Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, also imposes permanent trading and registration bans against Cornett and permanently prohibits him from further violations of federal commodities law, as charged.

The court’s order stems from a CFTC complaint filed on February 2, 2012, charging Cornett with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register with the CFTC as a commodity pool operator.

The order finds that, from at least June 2008 through at least October 2011, Cornett solicited prospective pool participants to invest in a pooled forex investment and that he acted as the manager and operator of the pool. The pool was referred to at various times as ITLDU, ICM, International Forex Management, LLC, and/or IFM, LLC, according to the order. In his solicitations, Cornett falsely told prospective pool participants that, while there were weeks when he either lost money or broke even trading forex, he had never experienced a losing month or a losing year trading forex, the order finds.

The order also finds that, from June 18, 2008 through September 2010, Cornett solicited approximately $7.07 million from pool participants, participants redeemed approximately $1.64 million, and Cornett lost approximately $4.17 million of the pool’s funds trading forex. During this period, Cornett had only one profitable month trading forex and earned little, if any, fees for acting as the pool’s operator, the order finds. Thus, during this period, Cornett misappropriated approximately $1.26 million of the pool’s funds and for most, if not all of the period, provided participants with false weekly reports/account statements, the order finds.

The court’s order further finds that, from October 2010 through October 2011, Cornett solicited an additional approximately $6.95 million from pool participants. Cornett transferred approximately $3.37 million to forex trading accounts at six foreign brokers and lost approximately $2.3 million at five of the brokers, and likely lost an additional $905,000 at the sixth broker trading forex with pool funds, the order finds. As of October 2011, Cornett had misappropriated approximately $1 million of the pool’s funds and less than $520,000 remained in bank accounts in the names of the pool, according to the order.

The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Texas, Internal Revenue Service Criminal Investigation, and the Federal Bureau of Investigation.

The CFTC also appreciates the assistance of the U.K. Financial Services Authority, the British Virgin Islands Financial Services Commission, the Ontario Securities Commission, Germany’s BaFin, the Swiss Financial Market Supervisory Authority, the Eastern Caribbean Securities Regulatory Commission, and St. Vincent and the Grenadines’ International Financial Services Authority.

CFTC Division of Enforcement staff members responsible for this action are Patrick M. Pericak, Daniel Jordan, Jessica Harris, Rick Glaser, and Richard B. Wagner.