The US Commodity Futures Trading Commission has charged David Michael Kogan and his company First Capital Futures Group, both of Sherman Oaks, California, with operating a fraudulent co
The US Commodity Futures Trading Commission has charged David Michael Kogan and his company First Capital Futures Group, both of Sherman Oaks, California, with operating a fraudulent commodity scheme involving 58 customers and causing more than USD3m in customer losses.
The complaint was filed on 26 June 2009 under seal in the US District Court for the Western District of Missouri. On 30 June the Honorable Dean Whipple of the US District Court entered an order freezing the assets of both First Capital and Kogan and all customer accounts they traded. The court also scheduled a preliminary injunction hearing in this matter for 14 July 2009.
The CFTC complaint alleges that the defendants fraudulently solicited members of the public to trade options on commodity futures contracts by misrepresenting and failing to disclose material facts concerning, among other things, the likelihood that a customer would realise large profits from trading options; the risk involved in trading options; the existence of certain options positions in customer accounts; and the dismal performance record of First Capital customers trading options.
According to the complaint, Kogan and other First Capital brokers repeatedly told customers that they would make substantial amounts of money in a very short time by trading options. First Capital routinely failed to disclose adequately the risk of loss inherent in trading options.
The complaint specifically alleges that, despite mounting trading losses, Kogan, as well as other First Capital brokers, told customers that Kogan had ‘made millionaires out of several customers’ and that many First Capital customers were making money. However, First Capital customers instead lost more than USD3m, of which more than USD2.2m was collected as commissions and fees.
The CFTC complaint seeks to enjoin defendants from violating commodity laws and from participating in any activity related to trading in any commodity, demands a return of funds for defrauded customers, repayment of ill-gotten gains, an award of civil monetary penalties, and other relief.
