Guaranteed-Returns Fraudster Fined $2.5 Million and Banned by CFTC

The concept of sound Regulation was reinforced in another case of investors suffering fraud at the hands of unauthorized professionals. The CFTC reported that Daniel Steele and Champion Management International LLC (Champion Management), a Missouri-based limited liability company, faced a monetary fine for their involvement in a fraud that deceived investors by trading in financial derivatives.

Details issued by the CFTC show that the court’s Order requires the defendants to jointly pay $1.5 million in restitution to defrauded investors, it imposes a $1 million civil monetary penalty, and requires Relief Defendant Judy D. Steele to disgorge ill-gotten gains totaling $187,083. The Order also imposes a permanent trading and registration ban on the defendants and prohibits them from further violations of the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.

The defendant solicited 24 individuals to invest in his collective investment schemes that traded in the vibrant foreign exchange markets. The investigation came as a result of a complaint that was filed on the 25th of September 2013 and an amended Complaint filed on July 16, 2014, charging that from approximately February 28, 2011 through September 25, 2013, Steele individually and acting as an agent of Champion Management solicited at least $1.97 million.

The fraud showed typical signs of deception as Steele had concealed trading losses, misappropriated approximately $1 million of pool participants’ funds and issued false account statements to pool participants. The well-known Madoff pyramid-scheme scam highlighted the vulnerable nature of investors, particularly when they are allegedly dealing with professionals who are experts in their field of practice. Details in the Order state that the defendant had knowingly misrepresented his position as a trading professional, he was quoted as saying: “I’ve been doing this long enough to know what I can consistently deliver above expenses, in all market conditions…the return is fixed and is currently 5% per month on your invested amount compounded.”

Furthermore, the firm that Steele used as its counterparty was not regulated by the country's relevant authority to deal with US residents. Since new rulings were implemented under the Dodd-Frank Act, US residents are only allowed to deal in margin FX products with a regulated broker that is authorized by the CFTC.