CFTC fines California resident and firm USD1m for commodity pool fraud
The US Commodity Futures Trading Commission has issued an order imposing a USD1m penalty against Craig A. Riley of Ladera Ranch, California and his firm Pressio Capital Management for fraudulently operating a commodity pool and misappropriating pool participant funds.
The CFTC administrative order also permanently bars the respondents from engaging in any commodity-related trading activities, including soliciting funds, registering with the CFTC and trading on behalf of themselves or others.
The order finds that, beginning in the autumn of 2006 and continuing through February 2008, respondents fraudulently operated a commodity pool, known as Pressio, which traded a variety of instruments including commodity futures contracts.
Riley solicited more than USD3m from approximately 19 individuals through false representations that the pool would be a conservative, diversified balanced asset fund. However, as the order finds, contrary to such claims Riley lost approximately USD2.5m almost exclusively trading commodity futures and misappropriated the remainder of the funds for personal and business expenses and for paying back existing pool participants.
The order further finds that the respondents issued false account statements to pool participants to conceal the trading losses and misappropriations. Based on the false account statements, respondents then persuaded participants to invest additional funds in the pool.
In addition, the order finds that PCM and Riley violated CFTC regulations by failing to register as a commodity pool operator and associated person and failing to comply with requirements for commodity pool operators.
In a related criminal action, on 12 January 2009, Riley pled guilty to fraud in connection with a scheme to defraud or obtain money or property by means of materially false pretences, representations or promises. Riley is currently serving a 41-month sentence. Criminal restitution was set at USD3,044,384.59.
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