Thu, 09/02/2012 - 14:00
The US Commodity Futures Trading Commission (CFTC) has filed an enforcement action against Christopher B Cornett of Buda, Texas, charging him with solicitation fraud, issuing false account statements, misappropriating pool participants’ funds, and failing to register in connection with an off-exchange foreign currency (forex) fraud.
According to the CFTC complaint, filed on 2 February, 2012, in the US District Court for the Western District of Texas, from at least June 2008 through at least October 2011, Cornett solicited prospective pool participants to provide funds for a pooled investment in forex. Cornett acted as the manager and operator of the pool, which was referred to at various times as ITLDU, ICM, International Forex Management, LLC and/or IFM, LLC. In soliciting prospective pool participants for the forex pool, Cornett allegedly falsely told prospective pool participants that, while there were weeks when Cornett either lost money or broke even trading forex, Cornett had never experienced a losing month or a losing year trading forex.
During the period from 18 June, 2008, through September 2010, Cornett allegedly solicited approximately USD7.07 million from pool participants, pool participants redeemed approximately USD1.64 million and Cornett lost approximately USD4.17 million of the pool’s funds trading forex. During this period, Cornett allegedly had only one profitable month trading forex with pool funds. As a result, Cornett allegedly misappropriated approximately USD1.26 million of the pool’s funds. Furthermore, most, if not all, of the profits, losses and account balances that Cornett reported to pool participants were false, according to the complaint.
From October 2010 through October 2011, Cornett allegedly solicited an additional approximately USD6.95 million from pool participants, and pool participants redeemed an additional approximately USD2.22 million. During this period, Cornett transferred approximately USD1.81 million of pool participant funds to accounts at three foreign firms and lost all but approximately USD1,600 trading forex, according to the complaint. Cornett also is alleged to have transferred approximately USD1.56 million of pool participant funds to three additional foreign firms during this period. Because Cornett was acting as a commodity pool operator (CPO) from 18 October, 2010, through at least 13 October, 2011, he was required to be registered as a CPO. As of 13 October, 2011, Cornett allegedly had failed to register as a CPO.
In the litigation, the CFTC seeks restitution, disgorgement, civil monetary penalties, trading and registration bans and a permanent injunction prohibiting further violations of the federal commodities laws.
The CFTC appreciates the assistance of the UK Financial Services Authority, the British Virgin Islands Financial Services Commission, the Ontario Securities Commission, Germany’s BaFin, and the Swiss Financial Market Supervisory Authority.
CFTC Division of Enforcement staff members responsible for this action are Patrick M. Pericak, Daniel Jordan, Jessica Harris, Rick Glaser, and Richard B. Wagner.
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