Ponzi scheme

California court fines Gordon Driver and Axcess USD41m for commodity pool Ponzi scheme

The US District Court for the Central District of California has entered a final judgment and permanent injunction order against defendants Gordon A. Driver of Las Vegas, Axcess Automation and Axcess Fund Management, both Nevada companies owned and controlled by Driver, in connection with a commodity pool Ponzi scheme in which the defendants defrauded over 100 participants in the US and Canada of over USD14m. 

Axcess Fund is registered with the CFTC as a commodity pool operator, and Driver is registered as an associated person of Axcess Fund.
 
The court’s final judgment order, entered on 12 July 2012, by Judge Otis D. Wright, II, imposes permanent trading and registration bans against the defendants and requires them jointly and severally to pay restitution of over USD9.5m to defrauded pool participants and a USD31.8m civil monetary penalty.  The order also permanently prohibits the defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.  The order stems from a CFTC complaint filed on 14 May 2009, which charged the defendants with fraud, misappropriation, and other CEA violations.
 
The 12 July order is based on the court’s 5 July 2012 summary judgment order, which finds that from between at least February 2006 and May 2009, Driver fraudulently solicited approximately USD14,319,905 from over 100 participants by telling pool participants that Driver had a successful software programme for trading E-mini S&P 500 futures; had profitable returns averaging one to five per cent per week (or 20 percent per month); had profitable returns in seven or eight out of 10 trades; and minimised risk by terminating trading after three losing trades in one day.  However, the order finds that Driver’s trading was “abysmally unprofitable,” and that Driver traded only USD3.7m of the USD14.3m in pool funds he had received and lost 94 per cent of those funds.
 
The summary judgment order also finds that the defendants never disclosed the actual losses to their participants and instead sent pool participants false account statements depicting profits, and that the defendants misappropriated more than USD10m from the pool to pay personal and business expenses. Such expenses, according to the order, included payment of USD9.7m to several pool participants as purported profits to conceal trading losses; however, these purported profits were not actual profits, but rather money invested by other pool participants.  Driver used an additional USD1.6m of pool funds on gambling in Las Vegas casinos, rent, meals, travel, entertainment, car payments, computer equipment, clothing, and cash withdrawals, according to the summary judgment order.
 
The summary judgment order also finds that Driver and Axcess Automation acted as CPOs but failed to register as CPOs with the CFTC, as required by the CEA, and that the defendants commingled pool funds with non-pool property and Axcess Fund failed to timely comply with a CFTC document request.
 

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