The US Commodity Futures Trading Commission has charged Boca Raton, Florida-based Michael A.
The US Commodity Futures Trading Commission has charged Boca Raton, Florida-based Michael A. Meisner and his company, Phoenix Diversified Investment Corporation, with commodity pool fraud.
A CFTC complaint filed in the US district court for the Southern District of Florida charges Meisner and Phoenix with fraudulently soliciting customers to participate in the Phoenix commodity pool, which traded exchange-traded commodity futures, and misappropriating pool participants’ funds. The accounts associated with the commodity pool allegedly suffered net losses of some USD5.8m between May 2003 and March this year.
According to the complaint, Meisner solicited pool participants by claiming that Phoenix owned a valuable software programme that dictated trading patterns in the futures markets and guaranteed high profits. He allegedly made various material misrepresentations, for instance about the past profitability and actual value of the pool, and failed to disclose material facts to persuade prospective and existing pool participants to invest or remain invested in the pool.
According to Phoenix account statements provided at the end of March, participants had a cumulative balance of more than USD4m in the pool, but Phoenix subsequently refused to honour participants’ requests to withdraw funds and several company cheques bounced.
The CFTC alleges that on April 21, Meisner wrote to pool participants advising them that ‘due to an unanticipated cash flow situation, Phoenix will be ceasing its regular day to day business activities’. In a second letter the next day, he indicated that Phoenix was out of cash and had no money available in any trading account because it was used to pay distributions to pool participants and to support his lifestyle.
In addition to the fraud and misappropriation allegations, the complaint also charges Phoenix with operating without being registered with the CFTC as a commodity pool operator, as required by federal commodities law. Victoria R. Meisner, Michael Meisner’s wife, is named in the complaint as a relief defendant for receiving at least USD1m in funds to which she was not entitled.
The CFTC is seeking a statutory restraining order, preliminary and permanent injunctive relief, the return of funds to defrauded participants, the repayment of ill-gotten gains, and civil monetary penalties. Pool participants brought an involuntary petition in bankruptcy court against Phoenix, while Meisner has filed for bankruptcy protection individually.
