On Monday the U.S. Commodity Futures Trading Commission (CFTC), the independent agency that regulates futures and option markets, announced that the District Court of South Carolina entered a summary judgement order against Robert S. Leben and Amy L. Leben for misappropriating investor funds and failing to register as commodity pool operators. The court order, which was unsealed today, requires the Lebens to pay more than $10 million in restitution, civil penalties and disgorgement of ill-gotten gains, in addition to a permanent injunctive relief.
In a CFTC enforcement action, Robert S. Leben and Amy L. Leben were accused of running a more than $3 million Ponzi scheme through their company, Structured Financial Group, LLC (SFG). In exchange for their investment, Robert Leben promised investors guaranteed returns and the safety of each pool participant’s principal investment, the complaint further charged.
In connection with the promotion of SFG, Robert made a series of materially false claims to bolster the credibility of his company. The claim was made by the CFTC that the company could provide quarterly payouts of 3.5%, which equated to an annual return of 14%. Robert Leben is also charged with fraudulently guaranteeing pool participants’ principal investment against risk of loss and bolstering these guarantees by issuing written false statements to pool participants.
More than $10 Million in restitution and penalties
In fiscal terms, the court order requires the defendants to pay $2,551,596 in restitution to the victims, $109,787 in disgorgement, and a civil monetary penalty of $7,654,788. In addition to the fiscal penalties, the court order imposed permanent trading, solicitation and registration bans, and prohibits the parties involved from violating the anti-fraud and registration provisions of the Commodity Exchange Act and CFTC Regulations, as charged.
More specifically, the CFTC alleged in its complaint that between August 2008 and March 12, 2014, the defendants fraudulently solicited and accepted at least $3.2 million from at least 12 investors to trade commodity futures contracts through a pool. However, rather than carrying out the investment program represented to investors, the Lebens traded only a portion of the pool participant funds in futures accounts and they sustained net losses for the majority of the period.
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The remainder of funds were misappropriated, with at least $2 million taken for personal use while representing to investors that the money would be used by SFG to purchase U.S. Treasury debt obligations and commodities.
The Lebens were also charged with using the misappropriated funds to purchase a house, vacations, a pool, an irrigation system, a car, cosmetic surgery, as well as to provide funds to family members and to pay everyday living expenses.
The scam exposed two years ago
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.
On December 16 2014 Robert Leben was indicted on criminal charges arising from the same fraudulent conduct that was the subject of the CFTC’s action. On October 8 2015 Robert Leben pled guilty and on April 14 2016 he was sentenced to 40 months in prison and ordered to pay restitution to victims of the fraud.
According to the official announcement, the CFTC appreciates the assistance of the South Carolina Attorney General’s Office and the Office of the U.S. Attorney for the District of South Carolina in this matter.