The US Commodity Futures Trading Commission has filed a civil anti-fraud enforcement action against Michael Bruce Gale, individually and doing business as Capital Management Group (CMG).
The CFTC complaint charges Gale with defrauding investors in connection with operating a commodity pool to trade commodity futures contracts, making false statements to pool participants, misappropriating pool funds, commingling investor funds with pool funds, and failing to register as a commodity pool operator with the CFTC.
The complaint alleges that from at least the summer of 2007 through the present, Gale, individually and doing business as CMG, fraudulently solicited and accepted at least USD742,606 from at least three individuals to trade commodity futures on the pool’s behalf.
The CFTC’s complaint was filed under seal on 25 July 2012, in the US District Court for the District of Colorado, and subsequently Senior US District Judge John L. Kane entered an emergency order freezing Gale’s assets and prohibiting the destruction or alteration of books and records.
According to the complaint, while soliciting and accepting funds, Gale allegedly misrepresented his past trading success and the pool’s profitability and value. For example, Gale allegedly represented to prospective and actual pool participants that 1) participants earned an approximate 100 per cent return on their investments over the prior five years, 2) that Gale made profits over USD2.4m trading commodity futures for himself and others each year between 2006 and 2008, and 3) that the pool’s value exceeded USD3.5m.
In reality, according to the complaint, Gale traded commodity futures contracts in two accounts into which he deposited less than USD300,000 and lost over USD62,000 trading between approximately 3 June 2009 and 15 September 2011. In addition, the complaint charges Gale with misappropriating a significant portion of pool participants’ funds between at least 9 February 2008 and the present rather than trade those funds in the pool as promised.
To conceal and perpetuate the fraud, Gale allegedly provided false tax records to prospective and actual participants, issued at least one fictitious trading account statement, reported false profits to participants, and failed to disclose trading losses and his misappropriation of pool participants’ funds.
In its continuing litigation, the CFTC seeks a civil monetary penalty, restitution, disgorgement of ill-gotten gains, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.