U.S. Forex and Commodities Trader Faces Over $4.7m Penalty for Fraud

Stroud Capital Management, TS Capital Partners, and TS Capital Management defrauded at least 17 investors.

The U.S. Commodity Futures Trading Commission (CFTC) announced today that the District Court for Southern Iowa entered a summary judgment Order against commodities trader, John David Stroud and his companies, Stroud Capital Management, LLC, TS Capital Partners, LLC, and TS Capital Management, LLC.

The order requires that Stroud pays restitution of $2,379,923 together with a civil monetary penalty of $2,343,323. It has also imposed permanent trading and registration bans against Stroud, prohibiting him from further violating the Commodity Exchange Act.

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The court order originates from a CFTC complaint filed four years ago which charged Stroud and his companies with fraud and misappropriation in operating two commodity pools. Stroud had accepted $4,888,442 from individuals to participate in their commodity pools, misappropriated $2,343,323 of their funds and lost $1,175,180 trading.

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Since February 2008, Stroud solicited at least 17 individuals to invest about $4.8 million through his companies. He proceeded to lose $1.1 million while trading off-exchange foreign exchange contracts and commodity futures. The defendant and his companies have also misappropriated $2.2 million of the funds which were collected from investors for personal expenses such as car payments, travel, shopping and entertainment.

Stroud had falsely represented to prospective and actual pool participants on numerous occasions that his trading was profitable. Furthermore, when confronted by pool participants about his misrepresentations, Stroud is said to have provided false bank statements to TS Capital Management employees, who were also pool participants. These showed a highly inflated version of the pool account balance that was, in reality, a fabricated version of Stroud’s personal bank account.

It is not the first time that Stroud has faced criminal action. In a related case against him in August 2013, Stroud pleaded guilty to one count of securities fraud. He was subsequently sentenced to 10 years imprisonment and ordered to pay $2,148,273 in restitution to his victims.

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