CFTC charges Minnesota commodity pool operator over USD5.5m Ponzi scheme
The US Commodity Futures Trading Commission has filed an enforcement action against Charles 'Chuck' E. Hays and Crossfire Trading, both of Rosemount, Minnesota, charging them with fraud and misappropriation in connection with a commodity pool Ponzi scheme.
In conjunction with the filing of the complaint in the US District Court for the District of Minnesota, the CFTC is seeking a statutory restraining order freezing defendants' assets and preserving records.
The CFTC's complaint alleges that, from January 2006 to the present, Hays and his company, Crossfire, a purported commodity pool, fraudulently solicited and accepted more than USD5.5m from at least three individuals and a charitable foundation for the purpose of trading stock index and crude oil futures.
Hays, according to the complaint, convinced at least one person to invest in Crossfire by representing verbally and in fabricated account that Crossfire earned consistent profits trading commodity futures with no losing months. However, as charged in the complaint, Crossfire has never had an active commodity futures trading account.
Additionally, in an attempt to alleviate at least two investors' suspicions as to what Hays was actually doing with their money, Hays provided an account statement for the Crossfire pool fabricated to appear as if it were issued by a legitimate brokerage company by using that brokerage's letterhead. This false account statement indicated that Crossfire maintained a trading account at the brokerage with more than USD37m, which in fact did not exist.
The CFTC complaint also charges Hays with misappropriating investor funds to purchase a USD4m yacht, and for other purposes.
'Hays ran his Ponzi scheme from his yacht, but was grounded when the tide turned as Federal authorities exposed this egregious fraud,' said CFTC acting director of enforcement Stephen J. Obie.
The complaint seeks orders requiring the defendants to provide the CFTC with access to books and records and to make an accounting with information necessary to determine the actual amounts of net contributions and profits or losses.
The CFTC also requests that the court issue orders of preliminary and permanent injunction against the defendants, a return of alleged ill-gotten gains, repayments to defrauded investors, monetary penalties, and other relief.
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