Commodity Options Fraud

Securities Fraud News: Hedge Fund Manager Accused of Securities Fraud Involving Payoffs to the Terminally Ill, SEC Halts Trading in Neruomama Shares, and Commodity Pool Fraud Leads to More than $10M in Penalties and Restitution

Published on: August 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Investment Advisor Firm Accused of Paying Off Terminally Ill Patients to Commit Fraud
The SEC has filed fraud charges against Donald Lathen and his Eden Arc Capital Management. Lathen is accused of recruiting at least 60 individuals who had less than six months to live and agreeing to pay them $10K each for the use of their names on joint brokerage accounts. When one of these individuals would die, he would allegedly redeem the investments by falsely representing that he and the terminally individual person were joint account holders.

Lathen recruited the terminally ill patients through contacts he had at hospices and nursing homes. In reality, it was Lathen’s hedge fund that owned the option investments.

As a result, of the purported omissions and misrepresentations, issuers paid over $100M in early redemptions. Lathen is accused of violating the custody rule by not properly putting the securities and money from the hedge fund in an account under the name of the fund or in one that held only client money and securities.

SEC Stops Trading in Neromamam Ltd.
The SEC has stopped the trading of Neuromama Ltd. (NERO) shares. The shares trade on the mostly unregulated over-the-counter markets and the regulator is concerned about transactions that may be “potentially manipulative, as well as other red flags that have purportedly been cropping up for years.

Neruomama’s paper value went up times four to $35B this year despite not much volume. The company’s shares went up by four times to $56/share. (On January 15, ’14, its value was $4.73B.)

Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M

Published on: April 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A district court in Texas is ordering a permanent injunction against RFF GP, LLC, KGW Capital Management, LLC, and Kevin White. The order is related to a 2013 Commodity Futures Trading Commission complaint charging them with fraud and misappropriation related to the running of a commodity pool.

The regulator says that defendants bilked participants when they got them to invest in the hedge fund and the commodity pool, named Revelation Forex Fund, LP. The fund was supposed to trade in off-exchange foreign currency. According to the CFTC, however, the defendants fraudulently solicited about $7.4 million from over 20 participants, misappropriating some $1.7 million from their money to cover personal spending and other matters. They allegedly fabricated the fund’s performance and lied about White’s experience in investing.

The Securities and Exchange Commission also filed its Texas securities case against White and the firms, along with a few other entities. The SEC said that White promoted a sophisticated forex trading strategy that was low risk but would lead to huge earnings. He also touted the Revelation Forex as a $1 billion hedge fund that managed to bring in returns of over 393% returns while earning an over 36% compound yearly return rate. White marketed himself as having 25 years of experience working in Wall Street when he had worked just six years as a licensed securities professional in Texas before the NYSE barred him.

Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc.

Published on: May 6, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Following the Commodity Futures Trading Commission’s decision to charge 20/20 Precious Metals Inc. and 20/20 Trading Co. Inc. with commodity options fraud and other violations, the U.S. District Court for the Central District of California has frozen the assets and records of the defendants. The commission contends that since 2006, the defendants defrauded prospective clients and customers of at least $4M.

Also named as defendants are Bharat Adatia, Todd Krejci, and Sharief McDowell. They and 20/20 Precious Metals are accused of unlawfully offering, entering, or confirming leveraged copper and palladium transactions. The three employees and 20/20 Trading allegedly committed fraud related to purported leveraged metals transactions.

The CFTC also claims that from 1/1/2006 through 10/2009, 20/20 Trading, McDowell, and Adatia made fraudulent solicitations to the public to sell and buy commodity options through 20/20 Trading while failing to disclose that the complex trades they were recommending made the chances of profit not likely if not impossible. Of the nearly $3.8M that 20/20 customers are said to have lost, about 63% of that went to 20/20 Trading commissions. Over $1.9M was lost by almost half of 20/20 Trading customers, who used individual retirement account funds to open accounts.

After 20/20 Trading closed in October 2009, Adatia established 20/20 Precious Metals. The CFTC says that Adatia closed 20/20 Trading after finding out that the National Futures Association was looking at the company for possible NFA rule violations. The agency says that as customers deposited over $1 million, 20/20 Precious Metals made over $400,000 in commissions.

More Blog Posts:
Commodities Industry Fears being held to Regulatory Standards of Securities Industry, Stockbroker Fraud Blog, February 4, 2011
CFTC Files Charges in Alleged California Ponzi Scam Involving the Fraudulent Solicitation of $14 million in Commodity Futures, Stockbroker Fraud Blog, January 18, 2011
Texas Securities Fraud: M25 Investments Inc., M37 Investments LLC, and Two Individuals Must Pay $16.2M Over Alleged Forex and Ponzi Scams, Stockbroker Fraud Blog, November 8, 2010 Continue Reading ›