Ponzi scheme

Hoopes to pay over USD11.8m for operating Ponzi scheme

The US Commodity Futures Trading Commission has obtained a federal court order requiring defendant Michael Justin Hoopes of Rexburg, Idaho, to pay more than USD10.4m in restitution and a civil monetary penalty of over USD1.4m for operating a Ponzi scheme that defrauded Idaho residents and others.

The order also imposes permanent trading and registration bans against Hoopes and permanently prohibits him from further violations of the Commodity Exchange Act and CFTC regulations, as charged.

The consent order of permanent injunction, entered on 26 July by Judge Edward J. Lodge of the US District Court for the District of Idaho, stems from a CFTC complaint filed on 25 October 2011, which charged Hoopes with solicitation fraud and misappropriation in connection with a commodity futures scheme.

The order finds that from at least September 2007 to 25 October 2011, Hoopes fraudulently solicited and accepted USD2,068,103 from 10 individuals, mostly Idaho residents, to trade stock index commodity futures in a commodity pool that he owned and operated called Aspen Trading. The order also finds that Hoopes solicited and accepted an additional USD9.68m from other mostly Idaho residents during the same period for various other investments, all of which was extensively commingled with Hoopes’ personal funds and funds accepted for futures trading in Aspen Trading. Hoopes misappropriated at least USD151,694 of the commingled funds for his personal expenses, including car, credit card, and mortgage payments, according to the order.

Between October 2006 and 31 May 2011, Hoopes suffered net losses of over 90 per cent of the USD2,280,550 he traded in futures, according to the order. To conceal his losses, Hoopes paid pool participants USD594,339 in purported profits in the manner of a Ponzi scheme and issued false account statements to at least one pool participant showing that the Aspen Trading account was earning monthly profits as high as 83.52 per cent, with only one losing month, according to the order. In reality, however, Hoopes never opened a trading account in Aspen Trading’s name but simply altered his personal trading account statements to make it appear as though the Aspen Trading account was earning large profits from futures trading, the order finds.

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