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CFTC charges IAG Capital Management and William Patrick Kelly with commodity pool fraud

The US Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges that IAG Capital Management, LLC (IAG) and William Patrick Kelly of Weston, Connecticut, who operated a USD6 million commodity pool called the IAG Multi Strategy Fund LP, wrongfully used more than USD320,000 of pool participants’ funds for Kelly’s personal use, made false statements to the National Futures Association (NFA), and commingled pool participants’ funds with their own funds.

The CFTC order requires IAG and Kelly jointly and severally to pay a USD280,000 civil monetary penalty.  The order also imposes permanent trading and registration bans against IAG and Kelly.
According to the order, from January 2008 to July 2010, IAG and Kelly solicited and obtained almost USD6 million from approximately 80 members of the general public to trade commodity futures contracts, among other contracts, on behalf of the IAG Multi Strategy Fund pool.  The order finds that from October to December 2009 and again in January 2010, IAG and Kelly engaged in a series of unauthorised money transfers from the pool’s accounts to IAG’s and Kelly’s accounts, whereby IAG and Kelly wrongfully used more than USD320,000 of the pool participants’ funds for Kelly’s personal use.  IAG and Kelly returned those funds to the pool’s accounts but did not disclose to pool participants their unauthorised withdrawals of funds from the pool, according to the order. Moreover, IAG and Kelly commingled pool participants’ funds with their own funds, the order finds.
The order further finds that in connection with an NFA examination, Kelly misrepresented to NFA staff the reason for the unauthorised withdrawals in 2009.  Kelly further misrepresented to the NFA that aside from the withdrawals in 2009, he had not engaged in any additional instances of unauthorised withdrawals of pool participants’ funds.  This was not true since Kelly wrongfully used pool participants’ funds again in January 2010, the order finds.
The order further finds that in March 2010, NFA brought a Member and Associate Responsibility Action against IAG and Kelly prohibiting them from soliciting funds and investments for commodity pools or other investment vehicles, placing trades on behalf of customers, commodity pools or investors, and disbursing or transferring funds of customers, investors, pool participants or commodity pools which they control. The IAG Multi Strategy Fund pool was liquidated in July 2010, and the remaining funds were returned to pool participants, the order further finds.

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