The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement complaint against a former member of the Chicago Board Options Exchange (CBOE), charging him with operating a multi-million dollar fraudulent scheme in addition to misleading NFA investigations, according to a CFTC statement.
Specifically, the U.S. derivatives regulator alleged in its complaint, filed on June 28, 2016, that from July 1999 to the present, Alvin Guy Wilkinson, of San Juan, Puerto Rico, and his limited partnerships Chicago Index Partners, L.P. (CIP) and Wilkinson Financial Opportunity Fund, L.P. (WFOF), both located in Sharon, Connecticut, engaged in a fraudulent scheme that solicited at least $6.9 million from at least 30 individuals for purchase of interests in the two entities. According to the CFTC investigations, the investors’ partnership interests had little or no value, and the defendant had misappropriated their investments.
As also alleged, the defendant assured the victims that they were pooling their funds for trading in a portfolio of financial instruments, using a market volatility strategy, while he was actually running a Ponzi scheme. Instead of using the investors’ monies in trading, Wilkinson allegedly misappropriated at least $5.2 million, while returning nearly $1.7 million to participants of WFOF and CIP as return of capital and purported profits.
Furthermore, in the course of soliciting actual and prospective participants for the pool, Wilkinson directed his accountant to issue false Schedule K-1 forms that misrepresented the profitability and value of participants’ interests. He also allegedly lied to participants about the likelihood of profit and risk of loss, and when participants demanded to withdraw from WFOF and CIP, Wilkinson ignored their requests, engaged in delay tactics, and lied about conditions that purportedly prevented him from making disbursements.
The US watchdog filed its complaint in the U.S. District Court for the Northern District of Illinois, charging the defendants with fraud and acting as Commodity Pool Operators or Associated Persons without being registered with the CFTC, as required.
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Interestingly, Wilkinson is a former member of the Chicago Board Options Exchange (CBOE), and served in leadership capacities on CBOE committees and on the CBOE’s board of directors.
Meanwhile, the CFTC complaint also charges Wilkinson with providing false statements and documentation to the National Futures Association (NFA) during its investigation made in May 2016. On June 2, the NFA suspended his membership and was prohibited from transferring any clients funds without the association’s approval.
More specifically, Wilkinson produced financial information for WFOF and CIP reflecting that nearly all of the funds’ assets were ultimately tied to a ’Note Receivable’ purportedly worth more than $12 million, although no such note exists. Accordingly, Wilkinson by this conduct provided false, fictitious, and fraudulent statements to the regulator.
As a result of the actions and misappropriation, the commission seeks full restitution to defrauded participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against violations of federal commodities laws, as charged.
The CFTC has been actively targeting firms and individuals involved in the illegal trading and fraudulent activity. The US watchdog has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.