The US Commodity Futures Trading Commission has charged three commodities pool operators with running a fraudulent fund that took more than USD 3 million from investors to trade futures contracts but lost and misappropriated all invested funds whilst falsely reporting returns of more than 20 percent.
Trading of the pool funds by defendants Scott Allensworth and his California company E-Slate, Robert J. Fusco and David Weddle was never profitable, according to the CFTC complaint filed in the US District Court for the Central District of California on October 2, 2017.
The defendants fraudulently touted to certain tax and retirement-planning clients lucrative trading returns and provided pool participants with false account statements that misrepresented the pool’s profitability and the value of each participant’s interest in the pool.
Allensworth, working with Fusco from around December 2013, fraudulently solicited at least $246,500 from 13 members of the public to participate in the DTG LLC pool. Additionally, Allensworth and Weddle solicited approximately $2.9 million for investment in the JustInfo LLC pool, according to the complaint.
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Nearly all of the pool money was lost by March 2017, according to the complaint that accuses the defendants of fraud, misappropriation, registration violations and issuing false statements.
In addition, Fusco and Weddle, who served as traders for the respective pools, made false account statements that referenced management fees that were far in excess of the amounts to which they were entitled under agreements with pool participants.
To cover up their fraud, the defendants allegedly provided fabricated account statements, “in some instances claiming profits in excess of 20% per month,” the agency said.
US District Judge Consuelo Marshall on October 3 froze the defendants’ assets, prohibited them from destroying their records and granted the CFTC immediate access to the records.
The CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans and injunctions against further violations of the federal commodities laws.
James McDonald, Director of the CFTC’s Division of Enforcement, commented: “This case is yet another example of personal and business relationships being exploited for fraudulent gain. Sadly, as is so often the case, fraudsters take advantage of these relationships, which are built on trust, to carry out their fraud. This case demonstrates the CFTC’s commitment to root out and prosecute such fraudsters.”