Judge Anthony J Battaglia of the US District Court for the Southern District of California has entered a consent order of permanent injunction against Scott Bottolfson and Spirit Investments, Inc (Spirit), both of Encinitas, Calif, and Increase Investments, Inc (Increase) of Reno, Nev, requiring them jointly and severally to pay a civil monetary penalty of USD6,813,462.51. The order also imposes permanent trading and registration bans against the defendants.
The court’s order stems from a CFTC enforcement action filed on 7 January, 2011, that charged Bottolfson, Spirit, and Increase with operating a USD14 million commodity pool Ponzi scheme and misappropriating USD11 million of customer funds from at least 2002 through 2010.
The order finds that Bottolfson solicited pool participant to trade commodity futures in two commodity pools, through his companies, Increase and Spirit. Bottolfson solicited approximately USD14 million from participants to be traded in the pools, but instead of trading pool participant funds as promised, he deposited only approximately USD2.97 million into trading accounts. The remaining USD11.03 million was deposited into Bottolfson’s personal accounts and used for his personal expenses, to make so-called profit payments to participants, as is typical of a Ponzi scheme, or was otherwise misappropriated, the order also finds. Of the USD2.97 million deposited into trading accounts, Bottolfson lost approximately USD845,000 trading, according to the order.
The court’s entry of the consent order represents the successful conclusion to a joint effort between the CFTC and the US Attorney’s Office for the Southern District of California. On February 11, 2011, judgment was entered against Bottolfson in the criminal case against Bottolfson (US v. Scott Bottolfson, No.10CR4734 JM), finding him guilty of wire fraud. Bottolfson received a 60-month jail sentence and was ordered to pay USD6,813,462.51 in restitution in the criminal action.
