Cilli and Progressive Investment Funds to pay USD700,000 over commodity pool Ponzi scheme
The US Commodity Futures Trading Commission (CFTC) has obtained a federal court consent order requiring defendants Victor Eugene Cilli and his company, Progressive Investment Funds LLC (Progressive), both formerly of Hackensack, NJ, to pay, jointly and severally, restitution of USD243,000 and a USD474,000 civil monetary penalty in connection with operating a commodity pool Ponzi scheme that defrauded investors of over USD500,000 and misappropriated investor funds.
The court’s order also finds that the defendants made false statements to the National Futures Association (NFA), failed to distribute required reports to pool participants, and failed to keep required books and records.
The consent order of permanent injunction, entered on May 29, 2012, by Judge William J. Martini, of the U.S. District Court, District of New Jersey (Newark), permanently prohibits Cilli and Progressive from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC. The order also permanently prohibits the defendants from further violations of the Commodity Exchange Act and CFTC regulations, as charged.
The order finds that between September 2006 and September 2007, the defendants engaged in a Ponzi scheme and solicited USD506,000 from four individuals to trade commodity futures (primarily E-mini S&P 500 futures contracts) in a pooled account. However, the defendants used only approximately USD263,000 to trade futures and had net trading losses of approximately USD201,168, according to the order. Instead of disclosing the losses, the defendants sent pool participants statements falsely showing trading profits. The defendants also sent two pool participants false IRS Form 1099s, which showed net profits instead of the actual net losses, the order finds. To conceal their scheme, defendants used pool participant funds to make purported profit payments to other participants, as is typical of a Ponzi scheme, the order finds.
Further, the order finds that the defendants failed to provide pool participants with quarterly and annual Net Asset Value reports, failed to retain required pool records, and falsely told the NFA that Progressive never had pool participants.
On 3 October, 2011, Cilli pled guilty to criminal securities fraud (15 USC § 78j(b) and 78ff(a) and 18 USC § 2) in connection with the fraudulent scheme described above (United States v. Victor Cilli, Crim. No. 1-660 (AET) (D. NJ), and to other, unrelated charges. In the criminal case, Cilli agreed to pay USD243,000 in restitution. The consent order in the CFTC’s case gives Cilli credit for any restitution payments made in the criminal action.
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