Raja Michael Mawad and his company RNS Holdings have been fined $398,000 for engaging in fraud and failing to file adequate annual reports for the firm. As the company’s owner and listed principal, the Texan from Houston has been engaged in numerous offenses which damaged the clients of a commodity pool he operated worth over $189,000.
The scheme has been unfolding for over six years with Mawad soliciting funds from a number of investors for a commodity pool.
Mawad and RNS Holdings have to pay a civil monetary penalty fine of $200,000 and $189,032.72 in restitution
RNS Holdings became a restored Commodity Pool Operator (CPO) in January 2013, with the National Futures Association (NFA) granting membership to the firm in May of the same year. In December 2014, the NFA reviewed a list of pool quarterly reports (PQRs). After finding some discrepancies the regulator requested from the company supplementary documentation.
Misappropriation of Commodity Pool Funds
As the regulator reviewed the files, it noticed some unusual activity in the company’s bank account, which pointed towards the funds being used by Mawad for personal purposes.
FBS To Celebrate 11th Anniversary with A Massive GiveawayGo to article >>
The January 2015 examination conducted by the NFA found that the fund had assets totaling about $18,000. During the previous calendar year, the fund’s holdings were as high as $14.6 million, just before Mawad’s trades had gone bad and he incurred substantial losses in 2014.
Mawad used funds which belonged to pool participants to pay obligations which RNS Holdings had. After the NFA’s executive committee issued a member responsibility action and associate responsibility action against Mawad in April 2015, the regulator found out that Mawad had routinely used funds from the commodity pool for personal needs.
Quarterly Management Fees Totaled 1% of NAV
According to Mawad he was getting paid his management fees which totaled 1 per cent of the fund’s net asset value. He told the NFA that he was supposed to be getting paid on the first day of each quarter and that he was not violating any laws and regulations by receiving the money.
That however was not what the NFA found out – Mawad had misappropriated over $52,000 from the fund and spent the money on jewelry, clothes, leisure activities and car payments.
The NFA also found out that Mawad took approximately $26,000 from the commodity pool to pay for client dinners, travel expenses and for the operational costs of a different commodity pool. The perpetrator also paid his Chief Financial Officer a total of $111,000, while having no right to do so.
The CFTC has issued an order requiring Mawad and RNS Holdings to pay civil monetary penalty fines of $200,000 and $189,032.72 in restitution to defrauded customers. He has been banned from further violating the Commodity Exchange Act and CFTC regulations.