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Fraud under the microscope

CFTC orders James G Brandolino to pay USD1 million penalty to settle CFTC charges of commodity futures fraud

The US Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges against James Giacomo Brandolino, previously of Joliet, Illinois, for conducting a number of fraudulent commodity futures investment schemes and misappropriating customer funds.

The CFTC order requires Brandolino to pay a civil monetary penalty of USD1 million and permanently bans him from trading on or subject to the rules of any CFTC-registered entity. The order also requires Brandolino to comply with certain undertakings, including never applying for registration with the CFTC.

The order finds that from at least July 2006 to January 2011, Brandolino accepted approximately USD3.6 million from pool participants, including family, friends, and community members, to invest in managed accounts and commodity futures pools that he and his entities operated. When soliciting and accepting participant funds, Brandolino misrepresented the performance of the pools, issued false periodic statements to pool participants that failed to disclose significant trading losses, and misrepresented the value of pool participants’ interests in the pools, according to the order.

Of the approximately USD3.6 million received from pool participants, Brandolino misappropriated about USD1 million for his own personal purposes, lost approximately USD781,000 trading futures, and used about USD1.3 million to pay back principal and purported profit to participants, as is typical of a Ponzi scheme, according to the order. The order finds that Brandolino used customers’ misappropriated money to purchase a BMW and a Rolex watch and for down payment on a condominium in Greece. Brandolino used false account statements sent to pool participants to hide the misappropriation, according to the order.

On 18 January, 2011, in a related criminal action brought by the US Attorney’s Office for the Northern District of Illinois, Brandolino was charged with mail fraud. Brandolino pleaded guilty on 9 August, 2011, and is currently in federal custody awaiting sentencing.

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