The US CFTC has obtained a USD21.8 million default court judgement and permanent injunction against Alvin Guy Wilkinson and his companies Chicago Index Partners and Wilkinson Financial Opportunity Fund in connection with a commodity pool fraud.
The order finds that Wilkinson misappropriated pool funds, fraudulently solicited pool participants, issued false statements to customers and provided false financial information to the National Futures Association (NFA). The order also finds that the defendants were not registered with the CFTC, as required.
Wilkinson is a former member of the Chicago Board Options Exchange (CBOE), who served in leadership capacities on CBOE committees and on the CBOE’s board of directors.
The court’s order requires the defendants, jointly and severally, to pay a USD12,382,207.20 civil monetary penalty, disgorge USD4,127,402.40 of ill-gotten gains, and pay restitution to defrauded investors totalling USD5,389,381. The order also imposes permanent trading and registration bans on the defendants and prohibits them from violating provisions of the Commodity Exchange Act and CFTC Regulations, as charged.
The order, entered on 22 November 2016, stems from a CFTC complaint filed on 28 June 2016, which charged Wilkinson and his entities with fraud, misappropriation, failing to register with the CFTC, and making misrepresentations to the NFA.
The order finds that, from July 1999 to the filing of the complaint, Wilkinson fraudulently solicited and accepted a total of USD11,017,774 from 30 investors for purchase of interests in WFOF and CIP, claiming that he would trade a portfolio of financial instruments on their behalf, including futures contracts, using a market volatility strategy. However, instead of trading participants’ monies as he represented he would, Wilkinson misappropriated all or a significant portion of their funds, or used them to pay earlier investors as a return of capital and purported profits in the manner of a Ponzi scheme, the order finds.
The order finds that Wilkinson also directed his accountant to issue false Schedule K-1 Forms that misrepresented the profitability and value of participants’ interests in WFOF and CIP. The order also finds that Wilkinson told investors that the assets of WFOF and CIP were all invested in a promissory note to an Australian financial firm; however, no such note exists, and WFOF and CIP have virtually no assets.
As part of his scheme, Wilkinson lied to participants about the likelihood of profit and risk of loss and, when participants demanded to withdraw their interests, lied about conditions that purportedly prevented him from making disbursements. According to the order, Wilkinson gave a litany of excuses to other investors about why he could not return their capital when requested, but omitted to tell them the true reason why he could not do so – that he had misappropriated their funds and their partnership interests were worthless.
Furthermore, the order finds that when the NFA was investigating Wilkinson in May 2016, he produced fraudulent financial information for WFOF and CIP reflecting that nearly all of the assets of the companies were ultimately tied to the non-existent promissory note.
