CFTC obtains disgorgement of ill-gotten gains from Smithers and Prosperity

The US Commodity Futures Trading Commission has obtained an order against Christopher Smithers, Jack Smithers and Prosperity Consultants determining that all three are jointly and severally liable for disgorgement of ill-gotten gains totalling USD96,263.61.

Christopher Smithers is individually liable for disgorgement of an additional USD109,783.00 in ill-gotten gains, as well as monetary penalties of USD206,046.61.

The order stems from the CFTC’s complaint filed on 29 June 2005. The complaint charged that the Smitherses and Prosperity committed fraud in the solicitation of clients to invest in commodity interest accounts managed by the Smitherses.

In a prior final order of permanent injunction, the Court found that the Smitherses and Prosperity solicited more than USD511,000 from at least 35 clients to trade commodity futures contracts by making promises of large profits and guaranteed returns in violation of the Commodity Exchange Act.

Of the more than USD361,000 in client funds directly invested with the Smitherses, the Court found that only about USD198,000 was actually used to trade futures contracts and of the more than USD149,000 in client funds invested with Prosperity, only USD113,500 was actually traded.

Further, the Court found that the Smitherses withdrew client funds and used them for personal expenses or sent them to other clients as purported returns on their investments, and made a number of misrepresentations to hide their unsuccessful trading and misappropriation from their clients.

Additionally, the Smitherses failed to disclose to clients that Christopher Smithers was already subject to an injunction barring him from trading futures contracts, and that more than 90 per cent of Christopher Smithers’ previous firm’s clients lost money.

Finally, the Court found that in soliciting customers, Christopher Smithers violated his prior federal court injunction.