The US Commodity Futures Trading Commission has obtained more than USD3.9m in restitution and civil monetary penalties in a federal judgment order against CSA Trading Group and Michael Derrick Peninger, both of Charleston, South Carolina, in a CFTC anti-fraud action.
The order stems from a CFTC complaint filed in 2008, charging CSA and Peninger with fraud and misappropriation in a USD1m commodity pool scam.
The order requires CSA and Peninger to pay, jointly and severally, approximately USD1.5m in restitution and USD2.4m in civil penalties.
The order also permanently bars them from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.
The order finds that from at least October 2002 through January 2007, the defendants fraudulently solicited and accepted more than USD1m from at least 20 individuals to participate in purported commodity pools.
The defendants fraudulently misrepresented Peninger’s prior trading success, guaranteed profitable returns and claimed that Peninger’s trading system eliminated the risks of trading commodity futures, according to the order.
In addition, the defendants misappropriated pool participants’ funds to pay back pool participants and fund their personal expenses and other business ventures.
To conceal their fraud, defendants issued false account statements showing profitable returns and provided false verbal assurances to participants that they were making money, the order further finds.
The court also ordered relief defendants Palmetto State Commodities and Daniel Island Builders, both Charleston-based firms that received funds from the defendants, to disgorge ill-gotten gains of USD31,547.62 and USD13,323.55, respectively.
A prior order, entered by the court on 11 December 2009, required another relief defendant, The Blooming Village Florist, to disgorge USD205,151.97.
The relief defendants neither provided legitimate services to the defendants nor have legitimate entitlement to the funds they received.
Peninger was convicted in October 2009 by a federal grand jury in Charleston of eight counts of mail fraud and one count of making a false statement to an FBI agent in connection with Peninger’s operation of CSA, among other enterprises. Peninger is scheduled to be sentenced on 12 April 2010.
