The US Commodity Futures Trading Commission (CFTC) has obtained a federal court order freezing assets held by defendants Robert J. Andres and Winsome Investment Trust (Winsome), both of Houston, Texas, Robert L. Holloway of San Diego, California, and US Ventures LC (USV) of Salt Lake City, Utah.
The court’s order also prohibits the destruction of books and records. The Honorable Senior Judge Bruce S. Jenkins of the US District Court for the District of Utah scheduled a hearing on the CFTC’s motion for a preliminary injunction on February 14, 2011.
The order stems from a CFTC civil anti-fraud complaint filed under seal in the federal court on January 24, 2011, charging Andres and Winsome with fraudulently soliciting individuals to invest in a commodity futures pool. The complaint also charges defendants with misappropriating participant funds and concealing their fraud by issuing false account statements to pool participants regarding the profitability of their investments.
Specifically, from at least May 2005 through November 2008, Andres and Winsome allegedly fraudulently solicited and accepted at least USD50.2 million from at least 243 individuals to invest in a commodity futures pool operated by Holloway and USV. In their solicitations, Andres and Winsome falsely claimed a successful track record and guaranteed the return of participants’ principal and profits, the complaint charges.
The complaint further alleges that Andres and Winsome deposited approximately USD26.4 million in USV trading accounts and withdrew approximately USD15.7 million from the accounts. However, contrary to Andres’ and Winsome’s claims of consistently profitable trading, USV’s and Holloway’s futures trading was not successful, sustaining overall net losses of approximately USD10.7 million, according to the complaint.
Defendants allegedly traded only a portion of Winsome’s pool’s funds and misappropriated the majority of participant funds to pay purported “profits” to pool participants in a manner akin to a Ponzi scheme. Holloway and Andres also allegedly used participant funds to pay personal and unrelated business expenses. Holloway used participant funds to pay for houses, cars, home furnishings, jewelry and lawn and maid services, the complaint charges. Andres allegedly used participant funds to invest in unrelated businesses, including USD4.2 million to purchase an aerospace consulting business, and to provide money to his wife.
To conceal misappropriation of investor funds and trading losses, the defendants allegedly fabricated and provided false statements to participants reflecting consistently profitable trading with no losses. On several occasions, Holloway allegedly directed USV employees to use his “guessimated” trading results for participant account statements. Also, despite losing approximately USD10.7 million through trading, participants’ account statements reflected consistently profitable daily returns of up to 1.6613 percent, with virtually no losses, according to the complaint.
In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution to defrauded customers, civil monetary penalties and permanent injunctions prohibiting trading and further violations of federal commodities law.
