The U.S. Commodity Futures Trading Commission filed a federal civil enforcement action today in which it charged Executive Management Advisors and its sole principal with fraud and embezzlement for operating a Ponzi scheme.
The CFTC’s complaint, filed in the U.S. District Court for the Southern District of Ohio, charges that Executive Management Advisors and its sole principal, John Bullar, while acting as Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs), fraudulently solicited over $8.3 million from at least 40 investors for pooling and trading in futures and options; provided participants with false account statements; embezzled and misappropriated participants’ funds; and acted as CPOs and CTAs while failing to register as such with the CFTC.
The CFTC complaint alleges that the defendants represented to participants that their funds would be pooled in a managed account to trade commodity futures and options contracts on designated contract markets. According to the complaint, however, only a fraction of the participants’ funds was traded.
Instead, the defendants operated a Ponzi scheme and misappropriated and embezzled approximately $6 million of participants’ funds. Bullar used these funds to pay his personal expenses, make cash withdrawals, issue checks to himself, and transfer money to his personal accounts or accounts that he controlled, according to the complaint.
The CFTC complaint further alleges that the defendants misrepresented and omitted material facts to pool participants by intentionally or recklessly:
Failing to disclose that most of the participants’ funds would not be invested and traded;
Failing to disclose that defendants were misappropriating and embezzling participants’ funds;
Providing participants with false account statements showing fictitious profits and account balances and concealing trading losses; and
Failing to disclose that pool participant funds were being used to pay certain pool participants their fictitious trading profits and/or balances as reported on false account statements for such participants.
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and permanent injunctions from further violations of the federal commodities laws, as charged.