This week alone the Commodities Futures Trading Commission issued 5 separate press releases regarding various frauds and ponzi schemes.   As we have noted many times before investors should make sure they conduct adequate due diligence into their managers.  It also goes without saying, but managers should not engage in fraudulent conduct, make misrepresentations to investors, lie to investors or regulators, or do anything that is contrary to what is stated in the investment program offering documents.  Four of the press releases are reprinted below.

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Release: 5646-09
For Release: April 9, 2009

New York Court Enters Order Imposing a $240,000 Fine and Other Sanctions against New York State Resident Michael Vitebsky in a Foreign Currency Scam

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that it obtained $240,000 in sanctions and a permanent injunction in a consent order against Michael Vitebsky, a resident of New York State, in connection with his participation in an illegal foreign currency (forex) boiler room operation and for violating the anti-fraud provisions of the Commodity Exchange Act. The order also imposes permanent trading and registration bans on Vitebsky.

Vitebsky is obligated to pay the $240,000 civil monetary penalty upon satisfaction of a $220,000 forfeiture obligation entered in a parallel criminal proceeding, U.S. v. Vitebsky, E.D.N.Y. Docket No. 04 Cr. 0419.

The order was entered by Judge Leo I. Glasser of the U.S. District Court for the Eastern District of New York and stems from a CFTC complaint filed in 2003 (see CFTC News Release, 4852-03, October 16, 2003). The order enters findings of fact that Vitebsky and others participated in a scheme in which Vitebsky used A.S. Templeton Group, Inc., a company of which he was the president and treasurer, to fraudulently solicit funds from customers for forex transactions.
According to the order, Vitebsky helped divert customer funds for unauthorized purposes and willfully made false representations to customers regarding the profitability of their accounts.

The CFTC would like to thank the U.S. Attorney’s Office for the Eastern District of New York for their assistance.

The following CFTC staff members are responsible for this case: Sheila Marhamati, Philip Rix, Steven Ringer, Lenel Hickson, Jr., and Vincent McGonagle.

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Release: 5645-09
For Release: April 9, 2009

CFTC Charges Austin, Texas Resident Steven Leigh Shakespeare and His Company, Guardian Futures, Inc., With Fraud and Unauthorized Trading

WASHINGTON, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that it charged Steven Leigh Shakespeare, and his company, Guardian Futures, Inc., both of Austin, Texas, with fraud and unauthorized trading of customer accounts, resulting in combined customer trading losses of at least $196,000.

The CFTC complaint, filed on April 8, 2009, in the U.S. District Court for the Western District of Texas, alleges that Shakespeare engaged in a series of unauthorized transactions and fraudulent acts in the accounts of Plains Grain Company, Inc. and Evans Grain Marketing LLC. The complaint charges that Shakespeare, throughout the course of the unauthorized transactions, made misrepresentations and omitted material facts to customers and to Alaron Trading Corporation, the futures commission merchant to whom Shakespeare had introduced the customer accounts.

On the same day the complaint was filed, the court entered a statutory restraining order preserving books and records and providing the CFTC immediate access to such books and records.

In its continuing litigation, the CFTC seeks restitution to customers, disgorgement of all ill-gotten gains, civil monetary penalties, a permanent injunction, and trading prohibitions, among other sanctions.

The CFTC appreciates the assistance of the office of the United States Attorney for the Western District of Texas.

The following CFTC Division of Enforcement staff are responsible for this case: Timothy J. Mulreany, David Reed, Michael Amakor, Paul Hayeck, and Joan Manley.

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Release: 5644-09
For Release: April 9, 2009

William D. Perkins of St. George, Utah Ordered to Pay More Than $2 Million in Sanctions in CFTC Ponzi Scheme Action

Universe Capital Appreciation Commodity Pool, Operated by Perkins, Part of Larger CFTC Action that Has Resulted in More than $45 Million in Judgments

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that it obtained a federal court order against William D. Perkins of St. George, Utah and Tax Accounting Office (TAO), Perkins’ private bookkeeping service, for more than $2 million in an anti-fraud action brought by the CFTC in 2006. The CFTC action alleged that Perkins fraudulently solicited $3.4 million from investors in a commodity pool he operated under the name Universe Capital Appreciation LLC. (See CFTC Release 5240-06 October 5, 2006.)

The opinion and order were entered on March 25, 2009, by U.S. District Judge Robert B. Kugler of the District of New Jersey.

Specifically, the order requires Perkins to repay $1.6 million to investors and a civil monetary penalty of $354,462, and prohibits Perkins from engaging in any business activities related to commodity futures or options trading. The court also ordered relief defendant TAO to repay $76,000 of investor money in which TAO had no legitimate interest.

In the opinion, Judge Kugler found that Perkins was reckless to solicit funds for his commodity pool without making a reasonable inquiry into the validity of representations that third parties made regarding the performance of the “superfund”, especially where Perkins had personal experience in three previous failed high yield investment schemes with one of the parties in which they had lost over $2 million of participant funds.

The CFTC complaint alleged that Perkins touted Universe Capital Appreciation LLC as a way for investors with less than $100,000 to participate in a so-called “superfund” that Perkins claimed was making “astonishing” profits of approximately 100 percent annually trading financial futures contracts. In fact, the CFTC complaint alleged that the “superfund” was itself a massive fraud that was the subject of other CFTC actions resulting in over $45 million in judgments. (See CFTC Press Releases 5447-08 February 7, 2008 and 5357-07, July 23, 2007.)

The following Division of Enforcement staff members are responsible for this case: Elizabeth M. Streit, Joy McCormack, Venice Bickham, Scott R. Williamson, Rosemary Hollinger, and Richard Wagner.

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Release: 5642-09
For Release: April 7, 2009

Federal Court Issues Preliminary Injunction Against Two Nevada Corporations in $20 Million Commodity Pool Ponzi Scheme Operated by Tennessee Resident, Dennis Bolze

Court Freezes Assets of Centurion Asset Management and Advanced Trading Services; Bolze Is Arrested

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that on April 1, 2009, a federal court judge in Knoxville, Tennessee issued a preliminary injunction against defendant Centurion Asset Management, Inc. (Centurion) and relief defendant Advanced Trading Services, Inc. (ATS), both located in Las Vegas, Nevada.

Judge Thomas A. Varlan issued the order that freezes the assets of Centurion and ATS and prohibits Centurion from further violations of the Commodity Exchange Act, as charged. The court determined that the preliminary injunction was necessary to protect the public from further loss and damage and to enable the CFTC to fulfill its statutory duties.

The order stems from a CFTC complaint filed on March 3, 2009, charging Dennis Bolze of Gatlinburg, Tennessee, and Centurion, with fraud and misappropriation in operating a $20 million commodity pool Ponzi scheme. (See CFTC v. Bolze, et. al., No. 09 C 88 [E.D. Tenn. 2009] and CFTC Press Release 5634-09, March 12, 2009).

As alleged, Bolze and Centurion operated a Ponzi scheme for at least six years that defrauded more than 100 investors and caused approximately $20 million in investor losses. ATS was charged as a relief defendant for receiving funds from defendants to which it was not entitled. Bolze and Centurion told investors that they were pooling and investing customer money in S&P 500 and NASDAQ 100 stock index commodity futures, but instead misappropriated most of the funds, according to the complaint.

Bolze Arrested on March 12

On March 12, 2009, Bolze was arrested in Pennsylvania by federal authorities in connection with a related criminal complaint. However, Bolze was in the custody of the U.S. Marshal’s Service at the time of the March 31 hearing. As a result, Judge Varlan’s preliminary injunctive order did not address the CFTC’s charges against him.

In the continuing litigation, the CFTC is seeking permanent injunctive relief, return of funds to defrauded participants, repayment of ill-gotten gains, civil penalties, and other equitable relief.

The following CFTC Division of Enforcement staff are responsible for this case: Jon J. Kramer, Diane M. Romaniuk, Michael Tallarico, Mary Beth Spear, Ava M. Gould, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.