CFTC charges operator of commodity futures pool over USD40m Ponzi scheme
The US Commodity Futures Trading Commission has charged Daren L. Palmer of Idaho Falls, Idaho, with operating a Ponzi scheme involving approximately USD40m in connection with the unregistered Trigon Group commodity futures pool.
The CFTC's complaint charges Palmer with solicitation fraud and misappropriation of pool funds for personal use and for use in running a Ponzi scheme. He is also charged with sending customers false account statements and failing to register with the CFTC as a commodity pool operator.
In conjunction with the CFTC's filing, Judge Edward J. Lodge of the US District Court for the District of Idaho issued a restraining order freezing the defendants' assets and preserving records.
The CFTC alleges that, from at least September 2000 onward, Palmer fraudulently solicited some USD40m from dozens of individuals and entities to participate in a commodity futures pool to trade commodity futures or options on commodity futures contracts.
In soliciting prospective and existing participants, Palmer allegedly claimed that he was a successful commodity futures trader, that his pool had a successful track record, and that the pool achieved positive returns of as much as seven per cent monthly and 20 per cent annually.
'This is another unfortunate example of the maxim, 'If it appears too good to be true, it probably is',' says CFTC acting director of enforcement Stephen J. Obie. 'Investors must carefully scrutinise any investment opportunity that claims to be consistently profitable.
'The CFTC, working in tandem with other federal authorities, continues to pursue corrupt commodity professionals who treat investor's hard earned money as their own.'
In reality, the CFTC says, Palmer was neither successfully trading nor making an effort to do so. As alleged, despite taking in at least USD40m in participant funds since September 2000, Palmer only placed USD4.5m in his trading accounts.
Moreover, Palmer admitted in sworn testimony that he used participants' funds to pay principal and purported profitable returns to existing pool participants in a manner typical of a Ponzi scheme. He also admitted that he misappropriated pool funds for his personal use for the construction of a new home, to pay credit card bills, and purchase snowmobiles.
From the outset, Palmer also paid himself purported fees based on the falsified earnings and increased value of the pool. Contrary to his claim that he would be compensated only after pool participants earned a certain rate of return, during the course of Trigon's operation, Palmer helped himself to monthly fees ranging from USD25,000 to USD35,000, regardless of the profitability of Trigon's futures trading.
According to the complaint, Palmer concealed the fraud by failing to register with the CFTC and providing fabricated quarterly account statements to pool participants, which showed consistently profitable pool returns. The account statements reported that as late as 2008, the pool had increased in value to over USD65m.
Efforts are ongoing to account for and locate pool participant funds. in the litigation, the CFTC is seeking restitution, disgorgement of ill-gotten gains, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws and against further trading.
- Special Reports
- By Location
- Asian Hedge Funds
- BVI Hedge Fund Services
- Bermuda Hedge Fund Services
- Canada Hedge Fund Services
- Cayman Hedge Fund Services
- Channel Islands Stock Exchange
- Future of offshore funds
- Gibraltar Hedge Fund Services
- Guernsey Hedge Fund Services
- Hedge Funds in Germany
- Hong Kong Hedge Fund Services
- Ireland Hedge Fund Services
- Isle of Man Hedge Fund Services
- Jersey Hedge Fund Services
- Jersey Private Equity Services
- Latin American Hedge Funds
- London Hedge Fund Services
- Luxembourg Hedge Fund Services
- Luxembourg Private Equity Services
- Malta Hedge Fund Services
- Middle East Hedge Fund Services
- Singapore Hedge Fund Services
- South African Hedge Fund Services
- Spanish Hedge Funds 2008
- Switzerland Hedge Funds
- US East Coast Hedge Fund Services
- US Hedge Fund Services
- By Subject
Latest Special Report
- By Location