FROM: U.S. SECURITIES AND EXCHANGE DEPARTMENT
The Securities and Exchange Commission today charged a China-based company and its chief executive with fraud for recording fake sales of a weight loss product to inflate revenues in the company’s financial statements by millions of dollars.
The SEC alleges that China Sky One Medical Inc. (CSKI) falsely stated in 2007 annual and quarterly reports that it had entered into a strategic distribution agreement with a Malaysian company that would become the "exclusive" distributor of CSKI’s "slim patch" in Malaysia and generate $1 million per month in sales. However, the company never actually entered into any such agreement. CSKI instead created approximately $19.8 million in phony export sales to Malaysia that were recorded as revenue in its financial results for 2007 and 2008. CEO Yan-qing Liu certified the overstated financial results, which appear in CSKI’s financial statements through 2010 and continue to impact the company’s retained earnings on its balance sheet.
"Accurate and reliable financial reporting is the bedrock of our capital markets, and CSKI blatantly defrauded investors by fabricating sales and overstating its financial results," said John M. McCoy III, Associate Director of the SEC’s Los Angeles Regional Office
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, CSKI is based Harbin, China. In addition to weight loss patches, the company produces and sells sprays, ointments, and other Chinese traditional pain relief and health and beauty products. CSKI became a public company trading on the U.S. markets through a reverse merger in May 2006.
The SEC alleges that after CSKI devised the purported strategic distribution agreement with Takasima Industries – which is a Malaysian fitness equipment manufacturer and retailer – CSKI went on to falsely report export sales to Malaysia of more than $12.2 million for 2007, which constituted 25 percent of its total revenues. CSKI then falsely recorded $7.5 million (8.2 percent of total revenues) in such sales for 2008. Virtually all of CSKI’s reported sales to Malaysia via Takasima were bogus. Takasima only purchased $167,542 in slim patches from CSKI in 2007, and none in 2008. And it never entered into any distribution agreement with CSKI and never undertook – much less satisfied – any minimum purchase commitment.
According to the SEC’s complaint, CSKI also falsely claimed in its public filings that its top two customers for 2007 were sales agents for Takasima. CSKI identified those customers as Ningbo Yuehua International Trading Company and Guangzhou Xinghe International Trading Company, which collectively accounted for the phony 25 percent of CSKI’s total revenues for 2007. CSKI claimed that all of these purported sales to Ningbo Yuehua and Guangzhou Xinghe went through Takasima, while in fact Takasima never had any relationship with these two entities.
CSKI and Liu are charged with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and various Exchange Act provisions including corporate reporting, recordkeeping, internal controls, and false statements to auditors.
The SEC’s complaint seeks financial penalties against CSKI and Liu as well as disgorgement of ill-gotten gains by Liu, who personally benefited from the overstated financial statements through the company’s 2008 private placement of securities. The SEC also seeks to have Liu reimburse CSKI for certain incentive-based compensation he received during the period affected by the fraud pursuant to Section 304 of the Sarbanes-Oxley Act, and to have Liu barred from acting as an officer or director of a public company. The SEC also seeks to have CSKI and Liu permanently enjoined from future violations of these provisions of the federal securities laws
In addition to the court action, the SEC instituted administrative proceedings to determine whether to revoke or suspend registration of CSKI’s securities due to the company’s failure to file its annual report for 2011 or any quarterly reports for 2012.
The SEC’s investigation, which is continuing, has been conducted by Junling Ma, Rhoda Chang, and Marshall S. Sprung of the SEC’s Los Angeles Regional Office. The SEC’s Cross Border Working Group – which focuses on U.S. companies with substantial foreign operations – and the SEC’s Office of International Affairs assisted in the investigation. The SEC’s litigation will be led by David Van Havermaat.
Saturday, September 8, 2012
Thursday, September 6, 2012
CFTC COMMISSIONER BART CHILTON ON CONSUMER PROTECTIONS
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
"Magic Words"
Statement of Commissioner Bart Chilton on the Need for Additional Consumer and Customer Protections
Statement of Commissioner Bart Chilton on the Need for Additional Consumer and Customer Protections
August 31, 2012
Last November, in the wake of MF Global, I suggested that firms entrusted with customer funds be subjected to regular and robust deep data dives. I said that we needed to ensure the money was there all of the time and not just take folks' word for it. With the collapse of Peregrine Financial Group, it has become even more apparent that such customer protections are needed.
However, just saying that something should be done obviously doesn't make it happen. We are all aware of what have been termed "magic words" in the—well, let's call them, the "illusionary arts." While saying words like "abracadabra," "hocus-pocus" or "alakazam" may seem to instigate various supernatural forces to make impossible things occur, that's not how it works in real life, and certainly not much "magic" ever happens in government. We don't need words that make people disappear or allow a magician to pull a rabbit out of a hat, but we do need to put in place our regulatory magic words to actually do what some of us have been suggesting for quite some time. In our world, we do these things which might seem like regulatory rhetoric, but actually have important meaning for how our financial sector operates.
Our staff has worked diligently on customer protection issues. We've heard from various stakeholders and talked amongst ourselves. We've listened and learned a lot. But, it is time for us to get on with it and put in place our magic words to better protect customers and consumers alike. From my perspective, we should do at least four things in this regard:
1. Mandate Direct Access to Electronic Bank Records
There are still some futures commission merchants (FCMs) that don’t provide self-regulatory organizations (SROs) or the Commission with electronic access to their bank records. We should institute a policy of zero tolerance for such firms. If they don't allow direct access to electronic banking records, let’s immediately deny their ability to hold customer funds.
2. Require Standardized Audits
That means ensuring when front-line oversight and examinations are conducted by a SRO or a designated self-regulatory organization (DSRO), that an FCM is audited by the same standards required by the Commission. These standards should include, at a minimum, testing internal controls, and thorough examinations driven by the risk profile of the FCM. The auditing standards we set forth should be sufficiently comprehensive such that the basic customer protections of the Commodity Exchange Act (such as the protection of segregated customer funds) are ensured.
3. Institute Liquidity Notification Levels
We should institute two alert action stages (levels). Liquidity Level One should be a circumstance in which an FCM is approaching a problematic liquidity event and the firm may encounter difficulties meeting obligations. Liquidity Level One should require the FCM to immediately notify the Commission and other pertinent regulatory authorities when, for example, the firm is placed on "credit watch" or a bank or other financing entity withdraws credit facilities or an affiliate experiences a bankruptcy. Liquidity Level Two should be a circumstance in which the FCM no longer has enough liquidity (cash, access to credit, etc.) to continue operations. In such a situation, the FCM must transfer customer accounts to another FCM. Furthermore, the Commission should institute an "escape hatch" procedure in which a FCM that can’t demonstrate its access to adequate liquidity with verifiable evidence maybe required by Commission action to transfer its customer accounts to a solvent FCM.
4. Improve Consumer Education and Customer Disclosure
The Commission should also require disclosures to existing customers and provide transparent business activity information for consumers. Many individuals involved with the MF Global debacle wrote to me and expressed concern that they didn't fully understand the activities with which the FCM was involved. As the futures industry moves toward more retail-oriented businesses and in order to ensure more transparency and consumer-customer education, we should require FCMs to disclose the business activities in which it engages—including proprietary trading activities and the risks associated with those activities. This will provide an opportunity for consumers to make better-informed decisions about where to place (or not place) their hard-earned money.
Futures Insurance Fund
Finally, while it is outside of the regulatory purview of the Commission, and would require a statutory change, the Commission should encourage Congress to address the lack of a futures insurance fund. It makes no sense that such insurance protection is afforded to banking customers and those who invest in securities, yet not people that invest in futures. The funds of futures customers are every bit as significant as those of other customers. They should not disappear—presto chango—like a bad magic act.
In this regard, I have put forward a specific proposal (the Futures Investor and Customer Protection Act—FICPA) for which there have been many positive comments. Like our regulations, however, things just don't happen. I know these they take time: "Kazaam kalamazoo a new law for you," is not how a bill becomes a law. Nonetheless, I am hopeful that my colleagues and others will let their views be known on this important matter of customer protection.
None of this may be particularly magical but these steps, and others, will go a long way toward protecting customers and making sure they don’t get fooled again. While I'm not prejudging what the Commission will do on these issues, it is my hope and expectation that my colleagues and I move expeditiously to enact these necessary customer protection reforms soon.
"Magic Words"
Statement of Commissioner Bart Chilton on the Need for Additional Consumer and Customer Protections
Statement of Commissioner Bart Chilton on the Need for Additional Consumer and Customer Protections
August 31, 2012
Last November, in the wake of MF Global, I suggested that firms entrusted with customer funds be subjected to regular and robust deep data dives. I said that we needed to ensure the money was there all of the time and not just take folks' word for it. With the collapse of Peregrine Financial Group, it has become even more apparent that such customer protections are needed.
However, just saying that something should be done obviously doesn't make it happen. We are all aware of what have been termed "magic words" in the—well, let's call them, the "illusionary arts." While saying words like "abracadabra," "hocus-pocus" or "alakazam" may seem to instigate various supernatural forces to make impossible things occur, that's not how it works in real life, and certainly not much "magic" ever happens in government. We don't need words that make people disappear or allow a magician to pull a rabbit out of a hat, but we do need to put in place our regulatory magic words to actually do what some of us have been suggesting for quite some time. In our world, we do these things which might seem like regulatory rhetoric, but actually have important meaning for how our financial sector operates.
Our staff has worked diligently on customer protection issues. We've heard from various stakeholders and talked amongst ourselves. We've listened and learned a lot. But, it is time for us to get on with it and put in place our magic words to better protect customers and consumers alike. From my perspective, we should do at least four things in this regard:
1. Mandate Direct Access to Electronic Bank Records
There are still some futures commission merchants (FCMs) that don’t provide self-regulatory organizations (SROs) or the Commission with electronic access to their bank records. We should institute a policy of zero tolerance for such firms. If they don't allow direct access to electronic banking records, let’s immediately deny their ability to hold customer funds.
2. Require Standardized Audits
That means ensuring when front-line oversight and examinations are conducted by a SRO or a designated self-regulatory organization (DSRO), that an FCM is audited by the same standards required by the Commission. These standards should include, at a minimum, testing internal controls, and thorough examinations driven by the risk profile of the FCM. The auditing standards we set forth should be sufficiently comprehensive such that the basic customer protections of the Commodity Exchange Act (such as the protection of segregated customer funds) are ensured.
3. Institute Liquidity Notification Levels
We should institute two alert action stages (levels). Liquidity Level One should be a circumstance in which an FCM is approaching a problematic liquidity event and the firm may encounter difficulties meeting obligations. Liquidity Level One should require the FCM to immediately notify the Commission and other pertinent regulatory authorities when, for example, the firm is placed on "credit watch" or a bank or other financing entity withdraws credit facilities or an affiliate experiences a bankruptcy. Liquidity Level Two should be a circumstance in which the FCM no longer has enough liquidity (cash, access to credit, etc.) to continue operations. In such a situation, the FCM must transfer customer accounts to another FCM. Furthermore, the Commission should institute an "escape hatch" procedure in which a FCM that can’t demonstrate its access to adequate liquidity with verifiable evidence maybe required by Commission action to transfer its customer accounts to a solvent FCM.
4. Improve Consumer Education and Customer Disclosure
The Commission should also require disclosures to existing customers and provide transparent business activity information for consumers. Many individuals involved with the MF Global debacle wrote to me and expressed concern that they didn't fully understand the activities with which the FCM was involved. As the futures industry moves toward more retail-oriented businesses and in order to ensure more transparency and consumer-customer education, we should require FCMs to disclose the business activities in which it engages—including proprietary trading activities and the risks associated with those activities. This will provide an opportunity for consumers to make better-informed decisions about where to place (or not place) their hard-earned money.
Futures Insurance Fund
Finally, while it is outside of the regulatory purview of the Commission, and would require a statutory change, the Commission should encourage Congress to address the lack of a futures insurance fund. It makes no sense that such insurance protection is afforded to banking customers and those who invest in securities, yet not people that invest in futures. The funds of futures customers are every bit as significant as those of other customers. They should not disappear—presto chango—like a bad magic act.
In this regard, I have put forward a specific proposal (the Futures Investor and Customer Protection Act—FICPA) for which there have been many positive comments. Like our regulations, however, things just don't happen. I know these they take time: "Kazaam kalamazoo a new law for you," is not how a bill becomes a law. Nonetheless, I am hopeful that my colleagues and others will let their views be known on this important matter of customer protection.
None of this may be particularly magical but these steps, and others, will go a long way toward protecting customers and making sure they don’t get fooled again. While I'm not prejudging what the Commission will do on these issues, it is my hope and expectation that my colleagues and I move expeditiously to enact these necessary customer protection reforms soon.
Wednesday, September 5, 2012
Tuesday, September 4, 2012
SEC SAYS DEAF COMMUNITY TARGETED BY PONZI SCHEME
FROM: COMMODITY FUTURES TRADING COMMISSIOIN
CFTC Charges California Resident Marc Perlman and his company, iGlobal Strategic Management, LLC, with Solicitation Fraud and Misappropriation in Commodity Pool Ponzi Scheme
Defendants charged with fraudulently soliciting and accepting at least $670,000 from members of the public — largely persons from the deaf community
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York, charging Marc Perlman of Rancho Cucamonga, Calif., and his firm, iGlobal Strategic Management, LLC (iGlobal) with operating a commodity pool Ponzi scheme that fraudulently solicited and accepted at least $670,000 from at least 17 people — largely persons from the deaf community. Perlman was a principal and officer of iGlobal, and neither defendant has ever been registered with the CFTC.
Specifically, the CFTC complaint, filed on August 28, 2012, alleges that from at least March 2009 through at least November 2011, iGlobal and Perlman fraudulently solicited individuals to invest in a pooled investment vehicle to trade leveraged off-exchange foreign currency contracts (forex). Perlman furthered his and iGlobal’s fraudulent scheme by playing upon the Christian faith of certain iGlobal investors, using claims about his own faith and references to scripture to obtain the trust of certain iGlobal investors, according to the complaint.
The complaint further charges that less than half of the funds invested by the iGlobal investors, or approximately $305,000, were used to trade forex, resulting in losses that consumed nearly all of the invested funds. The rest of the funds were allegedly used for unauthorized purposes, including 1) payouts of fictitious "profits" to certain iGlobal investors, 2) cash withdrawals of funds that were not re-deposited into the iGlobal trading or bank accounts, 3) charges at department stores, electronic stores, grocery stores, and restaurants, and 4) payment of rent for Perlman’s personal residence. iGlobal and Perlman misrepresented that the iGlobal investors’ funds would be invested in forex and fraudulently omitted and/or concealed that iGlobal and Perlman used and planned to use investor funds for purposes other than forex investments, according to the complaint.
In addition, iGlobal and Perlman allegedly misrepresented that trades executed in connection with the iGlobal investments were profitable and that certain iGlobal investors were earning and were being paid, or would be paid, profits from the trading. iGlobal and Perlman also allegedly issued false written statements that reported profits and listed the respective iGlobal investors’ full principal when, in fact, more than half of the funds had been misappropriated and the trading resulted in net losses.
In its continuing litigation, the CFTC seeks restitution to defrauded investors, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws, as charged.
The CFTC appreciates the assistance of the U.K. Financial Services Authority.
CFTC Division of Enforcement staff members responsible for this case are Laura Martin, Christopher Giglio, Manal Sultan, Lenel Hickson, William Tylinski, Stephen Obie, and Vincent McGonagle.
CFTC Charges California Resident Marc Perlman and his company, iGlobal Strategic Management, LLC, with Solicitation Fraud and Misappropriation in Commodity Pool Ponzi Scheme
Defendants charged with fraudulently soliciting and accepting at least $670,000 from members of the public — largely persons from the deaf community
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York, charging Marc Perlman of Rancho Cucamonga, Calif., and his firm, iGlobal Strategic Management, LLC (iGlobal) with operating a commodity pool Ponzi scheme that fraudulently solicited and accepted at least $670,000 from at least 17 people — largely persons from the deaf community. Perlman was a principal and officer of iGlobal, and neither defendant has ever been registered with the CFTC.
Specifically, the CFTC complaint, filed on August 28, 2012, alleges that from at least March 2009 through at least November 2011, iGlobal and Perlman fraudulently solicited individuals to invest in a pooled investment vehicle to trade leveraged off-exchange foreign currency contracts (forex). Perlman furthered his and iGlobal’s fraudulent scheme by playing upon the Christian faith of certain iGlobal investors, using claims about his own faith and references to scripture to obtain the trust of certain iGlobal investors, according to the complaint.
The complaint further charges that less than half of the funds invested by the iGlobal investors, or approximately $305,000, were used to trade forex, resulting in losses that consumed nearly all of the invested funds. The rest of the funds were allegedly used for unauthorized purposes, including 1) payouts of fictitious "profits" to certain iGlobal investors, 2) cash withdrawals of funds that were not re-deposited into the iGlobal trading or bank accounts, 3) charges at department stores, electronic stores, grocery stores, and restaurants, and 4) payment of rent for Perlman’s personal residence. iGlobal and Perlman misrepresented that the iGlobal investors’ funds would be invested in forex and fraudulently omitted and/or concealed that iGlobal and Perlman used and planned to use investor funds for purposes other than forex investments, according to the complaint.
In addition, iGlobal and Perlman allegedly misrepresented that trades executed in connection with the iGlobal investments were profitable and that certain iGlobal investors were earning and were being paid, or would be paid, profits from the trading. iGlobal and Perlman also allegedly issued false written statements that reported profits and listed the respective iGlobal investors’ full principal when, in fact, more than half of the funds had been misappropriated and the trading resulted in net losses.
In its continuing litigation, the CFTC seeks restitution to defrauded investors, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws, as charged.
The CFTC appreciates the assistance of the U.K. Financial Services Authority.
CFTC Division of Enforcement staff members responsible for this case are Laura Martin, Christopher Giglio, Manal Sultan, Lenel Hickson, William Tylinski, Stephen Obie, and Vincent McGonagle.
Monday, September 3, 2012
HEDGE FUND MANAGER AND HIS FIRM ORDERED TO DISGORGE MORE THAN $2 MILLION
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced that on August 29, 2012, the U. S. District Court for the District of New Jersey entered final judgments against New Jersey hedge fund firm Clay Capital Management, LLC and its former Chief Investment Officer, James F. Turner II, for their roles in an insider trading scheme involving the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc. The Court ordered Clay Capital and Turner to pay $2.1 million in illicit gains and permanently enjoined them from future violations of the antifraud provisions of the federal securities laws.
The Commission’s August 31, 2011 complaint alleged that Turner’s brother-in-law, a director at Autodesk, tipped Turner with inside information about Autodesk’s planned acquisition of Moldflow in advance of Autodesk’s public merger announcement on May 1, 2008 and about Autodesk’s fourth quarter 2008 earnings in advance of Autodesk’s public earnings announcement in February 2008. The complaint further alleged that Turner’s close friend, a manager at Salesforce, tipped Turner with confidential information about Salesforce’s performance in advance of Salesforce’s public earnings announcement in February 2008. Turner traded on the inside information in Clay Capital’s hedge fund’s account, his personal accounts and several family member’s accounts. Turner also recommended that several other friends and family members trade in the three companies’ securities. In total, the traders made illicit gains of nearly $3.9 million.
In December 2011, Turner pled guilty to securities fraud in a related criminal action brought by the U. S. Attorney’s Office for the District of New Jersey and was sentenced in April 2012 to a prison term of twelve months followed by three years of supervised release and ordered to pay a fine in the amount of $25,000. U. S. v. James Turner, Case No. 2:11-cr-00868 (D.N.J.).
The final judgments, entered pursuant to Clay Capital’s and Turner’s consents, permanently enjoined them from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the Commission’s allegations, Clay Capital consented to an order for disgorgement of $1,062,822.36 plus prejudgment interest of $182,444.73, provided that all but $850,000 is waived based on its financial condition. Turner consented to an order for disgorgement of $2,585,241.94 plus prejudgment interest of $430,047.42, provided that all but $1,250,000 is waived based on his financial condition. Turner also has agreed to settle an administrative proceeding, to be instituted based on his criminal conviction and the entry of the permanent injunction, in which the Commission would bar him from associating with any broker, dealer, investment adviser, municipal securities dealer or transfer agent.
The Securities and Exchange Commission announced that on August 29, 2012, the U. S. District Court for the District of New Jersey entered final judgments against New Jersey hedge fund firm Clay Capital Management, LLC and its former Chief Investment Officer, James F. Turner II, for their roles in an insider trading scheme involving the securities of three companies – Moldflow Corporation, Autodesk, Inc. and Salesforce.com, Inc. The Court ordered Clay Capital and Turner to pay $2.1 million in illicit gains and permanently enjoined them from future violations of the antifraud provisions of the federal securities laws.
The Commission’s August 31, 2011 complaint alleged that Turner’s brother-in-law, a director at Autodesk, tipped Turner with inside information about Autodesk’s planned acquisition of Moldflow in advance of Autodesk’s public merger announcement on May 1, 2008 and about Autodesk’s fourth quarter 2008 earnings in advance of Autodesk’s public earnings announcement in February 2008. The complaint further alleged that Turner’s close friend, a manager at Salesforce, tipped Turner with confidential information about Salesforce’s performance in advance of Salesforce’s public earnings announcement in February 2008. Turner traded on the inside information in Clay Capital’s hedge fund’s account, his personal accounts and several family member’s accounts. Turner also recommended that several other friends and family members trade in the three companies’ securities. In total, the traders made illicit gains of nearly $3.9 million.
In December 2011, Turner pled guilty to securities fraud in a related criminal action brought by the U. S. Attorney’s Office for the District of New Jersey and was sentenced in April 2012 to a prison term of twelve months followed by three years of supervised release and ordered to pay a fine in the amount of $25,000. U. S. v. James Turner, Case No. 2:11-cr-00868 (D.N.J.).
The final judgments, entered pursuant to Clay Capital’s and Turner’s consents, permanently enjoined them from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the Commission’s allegations, Clay Capital consented to an order for disgorgement of $1,062,822.36 plus prejudgment interest of $182,444.73, provided that all but $850,000 is waived based on its financial condition. Turner consented to an order for disgorgement of $2,585,241.94 plus prejudgment interest of $430,047.42, provided that all but $1,250,000 is waived based on his financial condition. Turner also has agreed to settle an administrative proceeding, to be instituted based on his criminal conviction and the entry of the permanent injunction, in which the Commission would bar him from associating with any broker, dealer, investment adviser, municipal securities dealer or transfer agent.
Sunday, September 2, 2012
MAN AND COMPANY HAVE ASSETS FROZEN REGARDING COMMODITY POOL
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal court issues order freezing defendants’ assets and protecting books and records
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil anti-fraud enforcement action in the U.S. District Court for the Southern District of Texas, charging Jonathan Hansen of Pearland, Texas, and his company, J. Hansen Investments, LLC (JHI), with fraudulently soliciting and accepting more than $1.1 million from the public in a commodity pool scheme. Hansen exercised sole control and ownership over JHI, was JHI’s only employee, and has been a registered Associated Person of JHI since April 30, 2010, according to the complaint.The CFTC’s complaint was filed on August 24, 2012, and on August 29, 2012, Judge Nancy F. Atlas of the U.S. District Court for the Southern District of Texas issued a statutory restraining order freezing the defendants’ assets and prohibiting the destruction of books and records. The judge set a hearing date for September 6, 2012.
Specifically, the CFTC complaint alleges that from at least April 2009 through January 2012, Hansen and JHI fraudulently solicited and accepted approximately $1,117,160 from at least 10 members of the public to trade E-Mini S&P 500 futures contracts in a commodity pool he operated. The compliant relates that Hanson solicited participants by conducting individual meetings with potential participants and by word-of-mouth, among other means. Most of the participants were friends and acquaintances of Hansen and his parents, according to the complaint.
Of the amount received from participants, Hansen allegedly transferred approximately $134,965 to his personal or JHI’s futures trading accounts, both of which sustained consistent losses, and commingled pool funds with his own funds. According to the complaint, Hanson used the misappropriated funds for his personal use, including for car payments, office rent, restaurants, and utilities.
To conceal and perpetuate his fraud, Hansen allegedly prepared and distributed false account statements to participants via e-mail. These monthly statements falsely reported profits earned in pool participants’ trading accounts and inflated the value of the accounts, according to the complaint. Furthermore, Hanson allegedly issued false monthly trading memoranda to pool participants that falsely reported trading returns ranging from 0.58 percent to 2.20 percent and annual returns ranging from 10 percent to 30 percent.
In its continuing litigation, the CFTC seeks restitution to defrauded pool participants, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws, as charged.
The CFTC appreciates the assistance of the National Futures Association.
CFTC Division of Enforcement staff members responsible for this case are Danielle E. Karst, George Malas, Christine Ryall, Paul G. Hayeck, and Joan Manley.
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