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CFTC charges Florida firm with defrauding customers in commodity options scam

The US Commodity Futures Trading Commission has filed an enforcement action against Zurich Futures & Options and Michele LaBruce, both of Hollywood, Florida.

The action charges them with fraudulent solicitation of customers, using false claims of CFTC registration and membership with the National Futures Association, and with operating as an unregistered introducing broker.

The CFTC complaint, filed in the US District Court for Southern District of Florida, alleges that from around April 2006 to March 2007, the defendants fraudulently solicited approximately USD1.45m from at least 60 customers who opened trading accounts to trade commodity options.

The defendants allegedly targeted Canadian and other non-US citizens as customers and falsely claimed that Zurich was a member of the NFA and registered with the CFTC as an introducing broker. Through the Zurich website, solicitation materials, and the activities of their brokers, the defendants created a false impression that Zurich was a successful and well-established international introducing broker with an experienced investment team and offices in Zurich, Switzerland and Toronto.

In fact, the CTFC alleges, Zurich was nothing more than a sham operation that operated out of the Hollywood area. Zurich rented mail drop offices in Switzerland and Canada through which the defendants re-routed customer calls to southern Florida and funnelled mailings of solicitation materials and account opening documents.

According to the CFTC complaint, in slightly less than one year of operation Zurich collected more than USD1.3m in commissions and fees, while its customers lost almost all their money trading with Zurich. Zurich then abruptly shut down its operations with no notice to its customers and provided no way for those customers to get in touch with Zurich or its brokers.

The CFTC complaint charges LaBruce directly with fraud and with liability for Zurich's fraud. In addition, the CFTC alleges that by soliciting customers to open trading accounts at a futures commission merchant to trade on-exchange commodity options, Zurich was required to be registered as an introducing broker and LaBruce was required to be registered as an associated person of Zurich.

LaBruce is the wife of Adam Leon. In September 2006, the CFTC obtained a judgment against Leon as part of a case brought against Presidential FX for fraudulent solicitation of customers in connection with foreign currency option contracts.

Under that judgment, Leon was ordered to pay USD1.5m in restitution and a USD1m civil monetary penalty, and was permanently enjoined from engaging in any commodity-related activity.

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