The CFTC complaint, filed in the U.S. District Court for the Middle District of Tennessee, alleges that Blue Sky and Schneider willfully concealed material facts from and/or made false, fictitious, or fraudulent statements or representations to the NFA in connection with an NFA audit of Blue Sky conducted on or about October 21-23, 2008. At the time, Blue Sky was registered with the CFTC as a Commodity Pool Operator and a Commodity Trading Advisor, and Schneider was registered as Blue Sky’s sole Associated Person.
Blue Sky Capital Management Corp. (“Blue Sky”) and its principal, Gregory M. Schneider (“Schneider”) (collectively, “Defendants”), willfully concealed material facts from and/or made false, fictitious, or fraudulent statements or representations to the National Futures Association (“NFA”) in connection with an NFA audit of Blue Sky conducted on or about October 21-23, 2008 (“NFA audit”) pursuant to the NFA’s official duties under the Commodity Exchange Act (“Act”), as amended by the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, Title XIII (the CFTC Reauthorization Act of 2008 (“CRA”)), §§ 13101-13204, 122 Stat. 1651 (enacted June 18, 2008), to be codified at 7 U.S.C. §§ 1 et seq.
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In connection with the NFA audit, NFA staff asked Defendants questions about Blue Sky’s business. In response, Defendants, in addition to making other misrepresentations and omissions of material facts, falsely represented that Blue Sky had only managed ten customer accounts, that Blue Sky had managed customer accounts only since March 2008, and that Blue Sky had received no customer complaints; completely failed to disclose that Blue Sky had managed approximately eighty other customer accounts in 2007; and completely failed to disclose that a customer had complained to Defendants repeatedly about his Blue Sky account prior to, and even during, the NFA audit.
On or about March 27, 2007, Blue Sky registered with the Commission as a CTA, and Schneider registered with the Commission as Blue Sky’s sole AP. In approximately March 2007, Blue Sky began managing customer accounts at Global Futures & Forex, Ltd. (“GFT”), an FCM and FDM, ultimately managing approximately eighty accounts at GFT in 2007 (“2007 accounts”). The 2007 accounts traded exclusively in off-exchange foreign currency (“forex”) contracts, received net customer deposits of at least $1.2 million, and suffered net losses of approximately 30% of invested equity by August 2007, according to later NFA testing. On or about August 28, 2007, Defendants notified Blue Sky customers by email that Blue Sky planned to change its business model from a managed trading program to a pooled fund, that Defendants would no longer trade the customer accounts at GFT, and that customers would have to complete new management agreements if they wanted Blue Sky to continue trading for them. On or about November 1, 2007, Blue Sky registered with the Commission as a CPO.
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