Former CBOE Member Fined $21.8m for Fraudulent Activities in Ponzi Scheme

Wilkinson fraudulently solicited $11 million from investors claiming he would trade financial instruments on their behalf.

The US Commodity Futures Trading Commission (CFTC) has obtained a $21.8 million default judgment against Alvin G. Wilkinson and his entities, Chicago Index Partners (CIP) and Wilkinson Financial Opportunity Fund (WFOF), in connection with a commodity pool fraud which victimised 30 investors.

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Wilkinson, a former member of the Chicago Board Options Exchange (CBOE), who had served in a leadership capacity, is reported to have misappropriated pool funds, fraudulently solicited pool participants, issued false statements to customers and provided false financial information to the National Futures Association (NFA) without being registered with the CFTC.

Case History

The judgement stems from a CFTC complaint filed in June 2016 which charged Wilkinson and his entities with fraud, misappropriation, failing to register with the CFTC, and making misrepresentations to the NFA.

Wilkinson fraudulently solicited and accepted over $11 million from 30 investors.

It was found that from July 1999 to the filing of the complaint, Wilkinson fraudulently solicited and accepted over $11 million from 30 investors for the purchase of interests in WFOF and CIP, claiming that he would trade a portfolio of financial instruments on their behalf, including futures contracts, using a market volatility strategy.

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However, instead of trading participants’ monies, Wilkinson misused all or a significant portion of their funds, or used them to pay earlier investors as a return of capital and purported profits in the manner of a Ponzi scheme.

Furthermore, Wilkinson was found to have directed his accountant to issue false records that misrepresented the profitability and value of participants’ interests in WFOF and CIP.  He also told investors that the assets of WFOF and CIP were all invested in a promissory note to an Australian financial firm, but it was found that no such note exists, and WFOF and CIP have virtually no assets.

As part of his scheme, Wilkinson lied to participants about the likelihood of profit and risk of loss and, when participants demanded to withdraw their interests, lied about conditions that purportedly prevented him from making disbursements.

Wilkinson gave a number of excuses to other investors about why he could not return their capital when requested, but omitted to tell them that he had actually misappropriated their funds and their partnership interests were worthless.

He lied to participants about the likelihood of profit and risk of loss.

Finally, Wilkinson also produced fraudulent financial information for WFOF and CIP reflecting that nearly all of the assets of the companies were ultimately tied to the nonexistent promissory note.

Penalties

Wilkinson and his entities have been fined a total of $12,382,207 and are required to repay $4,127,402 from fraudulent gains. They are also required to pay restitution to defrauded investors totaling $5,389,381. The CFTC has also issued permanent trading and registration bans.

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