(HedgeCo.Net) The U.S. Commodity Futures Trading Commission has announced the filing of a civil enforcement action in the U.S. District Court for the Eastern District of Virginia charging Tate Street Trading, Inc. of Richmond, Va. and Leonard J. Cipolla of Chesterfield, Va. with misappropriating customer funds and fraudulent solicitation in connection with a commodity pool. The complaint also charges Tate Street and Cipolla with failure to register as a Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA), respectively.
“As these allegations show, the CFTC is committed to protecting customers from fraud in our markets” said CFTC Director of Enforcement James McDonald. “We will continue to work in parallel with our law enforcement partners to identify and prosecute the type of fraud alleged here.”
As alleged in the complaint, from June 2009 through April 2019, Tate Street and Cipolla fraudulently solicited and received approximately $7,096,303 from at least 42 pool participants in connection with the pooled trading of futures and options. As further alleged, the defendants misappropriated approximately $2,506,958 for business expenses or personal use and made approximately $3,066,827 in Ponzi-like payments to pool participants.
The complaint further alleges that despite having accepted approximately $7,096,303 from pool participants, the defendants transferred only approximately $1,462,834 into trading accounts. While the defendants typically promised pool participants returns of between 8 percent and 30 percent per year, their actual trading between June 2009 and April 2019 was profitable in only two years and resulted in cumulative net losses of approximately $1,462,305. The complaint also alleges that the defendants provided statements to pool participants that did not accurately reflect their trading results.
In its continuing civil litigation, the CFTC seeks restitution to defrauded pool participants, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act.