The US Commodity Futures Trading Commission has filed an enforcement action charging Phillip Milton of Palm Beach Gardens, Florida, Gregory Center of McLean, Virginia, William Center of Richmond, Virgina, and their Florida-based company Trade with operating a Ponzi scheme involving approximately USD28m in connection with the Trade commodity pool.
On 22 June, the same day the CFTC complaint was filed under seal in the US District Court for the Southern District of Florida, the court entered an order, also under seal, freezing defendants’ assets and preserving books and records. Both documents were unsealed by the court on 2 July.
As alleged, from at least May 2007 through July 2009, Milton, Gregory Center and William Center fraudulently solicited approximately USD28m from at least 900 persons to participate in a commodity pool to trade commodity futures and options, among other things.
In connection with operating the scheme, the complaint alleges that the defendants committed solicitation fraud and misappropriated pool funds. In addition, William Center is charged with issuing false pool account statements, and Trade, Milton and Gregory Center are charged with failing to register with the CFTC as commodity pool operators.
Specifically, to induce new pool investors, the defendants claimed to be successful commodity futures traders and touted the pool as having a profitable trading record. Despite taking in at least USD28m from investors, the defendants were not successful traders and placed only USD15m of investors’ funds in trading accounts at the pool, which consistently lost money during all but two months of its operation.
The defendants also allegedly misappropriated at least USD9.6m for their personal use and to continue the scam. As is typical of a Ponzi scheme, the defendants paid principal and purported profits to existing pool participants using funds from new investors.
The CFTC complaint names as relief defendants BD, CMJ Capital, Center Richmond and TWTT, all Florida corporations owned by the individual defendants. The relief defendants allegedly received funds as a result of the defendants’ fraudulent conduct and have no legitimate entitlement to those funds.
In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties and permanent injunctions against further trading and further violations of the federal commodities laws. The CFTC continues to attempt to account for and locate pool participant funds.
