Two men may have to pay a $2.3m fine from the U.S. Commodity Futures Trading Commission (CFTC), which is accusing them of fraud and for violating registration and commodity pool operator requirements.
A civil enforcement action filed in a Californian district court claims the president of Main & Prospect Capital, an unregistered commodity pool operator, and his father misappropriated over $2.3m given to them by investors.
The CFTC alleged that the two men convinced 19 investors to give them the money, telling them the cash would be used to invest in a pooled investment vehicle operated by Main & Prospect Capital and marketed to prospective investors as the Global Opportunity Fund.
According to the complaint, the firm deposited more than $1.1m of the fund’s assets into a futures trading account and traded a limited number of futures contracts.
However, instead of trading various financial instruments, including stocks, commodities and foreign currency as they said they would, the CFTC has accused the two men of dissipating and misappropriating the money to benefit of themselves and others.
The two men are also accused of having created and mailed false account statements that stated that fund was profitable to investors.
Moreover, the CFTC also alleged that when investors wanted their money back, the father lied and said they could not withdraw money because fund assets were in a “trade” or because of the CFTC’s investigation into the defendants’ conduct.
The CFTC also claimed the firm violated regulations by failing to operate its commodity pool as a separate legal entity and register with the CFTC as a commodity pool operator and that neither of the defendants registered with the CFTC as associated persons of Main & Prospect Capital, as required by the regulations.
As the case goes on, the regulator has stated that it will seek full restitution to defrauded investors, disgorgement of any ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act.
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