COURT ORDERS MAN TO PAY $2.1 MILLION PENALTY FOR ROLE IN FRAUDULENT COMMODITY POOL SCHEME

FROM:  COMMODITY FUTURES TRADING COMMISSION 
March 24, 2014

Federal Court in North Carolina Orders Mitchell Brian Huffman to Pay $2.1 Million Penalty for Defrauding Customers of More than $3.2 Million in Commodity Pool Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court supplemental Consent Order requiring CFTC Defendant Mitchell Brian Huffman, of Charlotte, North Carolina, to pay a $2.1 million civil monetary penalty for operating a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts (see CFTC Press Release 6183-12, February 17, 2012). In an separate Order as part of Huffman’s criminal sentencing, Huffman was ordered to pay $3.2 million in restitution to defrauded customers (see United States v. Mitchell Bran Huffman, Case Number 3:1-cr-00246 RJC filed in the U.S. District Court for the Western District of North Carolina).

The supplemental Order was entered on March 20, 2014, by Judge Graham Mullen of the U.S. District Court for the Western District of North Carolina and follows a Consent Order of permanent injunction entered on May 10, 2012, by Judge Mullen.

The Consent Order finds that Huffman operated a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts. In agreeing to the entry of the Consent Order, Huffman admitted to the factual and legal allegations contained in the CFTC’s Complaint, and the findings of fact and conclusions of law in the Consent Order. The Consent Order also imposes permanent trading and registration bans against Huffman, prohibits him from violating federal commodities law, as charged, and requires him to pay restitution and a civil monetary penalty as provided for in the supplemental Order.

According to the CFTC’s Complaint, from at least August 2006 to March 11, 2011, Huffman solicited prospective and actual pool participants, mainly family and friends, via in-person and direct telephone solicitations, to allow him to buy and sell exchange-traded commodity futures contracts on their behalf. During the period, Huffman accepted at least $3.2 million from approximately 30 participants throughout the United States. Huffman entered into “sponsorship agreements” with pool participants wherein Huffman represented that he would pool participants’ funds to trade commodity futures contracts on their behalf. Huffman represented to participants that he utilized a “proprietary trading program” that generated “profits” of 100 percent to 150 percent per year. Huffman claimed to retain 20 percent of all profits purportedly made from the “proprietary trading program.”

All of these representations by Huffman were false, according to the Consent Order. Unknown to participants, Huffman misappropriated participants’ funds for a variety of personal uses, including but not limited to (1) purchasing multiple motor vehicles for his personal use, including two Land Rovers and a Smart Car, (2) at least $71,255 for purchases related to Huffman’s classic car collection, (3) approximately $188,583 on personal travel and luxury vacations, including Disney cruises and first-class airfare to Hawaii and Las Vegas, Nevada, and (4) approximately $51,540 in charitable contributions in Huffman’s name. The trip to Hawaii was a 25th wedding anniversary celebration for Huffman, and Huffman brought along several pool participants on the trip to Hawaii, purportedly at his own expense, according to the Consent Order. These participants were completely unaware that their funds were being used by Huffman to pay for the luxury vacation. When Huffman could no longer sustain his fraudulent scheme, he admitted to special agents of the Charlotte, North Carolina office of the Federal Bureau of Investigation the fraudulent scheme described above and his participation therein, the Consent Order finds.

The CFTC appreciates the assistance of the Office of the United States Attorney for the Western District of North Carolina and the Federal Bureau of Investigation, Charlotte Office.

CFTC Division of Enforcement staff members responsible for this case are Timothy J. Mulreany, Michael Amakor, and Paul Hayeck.

CFTC CHARGES CALIFORNIA RESIDENT WITH RUNNING A COMMODITY POOL FRAUD SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION

CFTC Charges Californian Jeffrey Gustaveson with Fraud, Misappropriation, and Issuing False Statements in Commodity Pool Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a complaint in the U.S. District Court for the Northern District of California, charging defendant Jeffrey Gustaveson of Carlsbad, Calif., with fraud, misappropriation, and issuing false statements in an approximate $2.5 million commodity pool scheme.

According to the CFTC complaint, filed on August 29, 2012, from at least January 2010 through approximately July 2010, Gustaveson accepted at least $2,495,000 million from at least four individuals to invest in a commodity futures pool. However, rather than trade pool participants’ funds as promised, Gustaveson allegedly only used approximately $400,000 of the funds to trade commodity futures, which resulted in a net loss. Gustaveson kept the remaining funds in a checking account from which he used at least $400,000 of pool funds to pay his personal expenses, including hotels, restaurants, and online gambling, according to the complaint.

Furthermore, to conceal his fraud, Gustaveson allegedly distributed false trading account statements to pool participants that misrepresented the value of the pool, reported false profits, and failed to disclose Gustaveson’s misappropriation of pool participants’ funds. When his fraud was exposed, Gustaveson allegedly repaid a portion of pool participants’ funds, but, despite repeated requests to do so, Gustaveson allegedly has not returned $415,000 of pool participants’ money. According to the CFTC complaint, Gustaveson admitted in a California state court proceeding that he had misappropriated investor money and falsified financial statements in connection with the acts described in the CFTC complaint.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, 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.

CFTC Division of Enforcement staff members responsible for this case are Lindsey Evans, Mary Beth Spear, Diane Romaniuk, Ava M. Gould, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.