The US Commodity Futures Trading Commission has filed a civil enforcement action against Wisconsin resident Eric N Schmickle and his company, Q Wealth Management.
The CFTC complaint charges Schmickle and Q Wealth Management with operating a commodity futures Ponzi scheme. The complaint alleges that the defendants made misrepresentations to induce investment, misappropriated customer funds, and created and sent false account statements, invoices for commission, and tax forms.
Specifically, the complaint, filed on 24 September 2012, in the US District Court, Eastern District of Wisconsin, alleges that from at least May 2009 through approximately April 2012, Schmickle operated his fraudulent scheme through Q Wealth Management, a commodity trading advisor, and Aquinas SF LLC, a commodity pool operator.
Defendants allegedly solicited at least USD5.3m from at least 10 customers and, in their solicitations, made misrepresentations as to their trading performance. The defendants lost USD3m in trading, and Schmickle misappropriated approximately USD1.7m of customers’ funds for his own business and personal purposes and to pay purported returns to at least one customer with funds of other customers, according to the complaint.
To conceal the trading losses and the misappropriation, the defendants allegedly fabricated and sent to customers numerous false documents, such as fake account statements, invoices demanding commission payments for fake gains, and false Internal Revenue Service forms showing gains.
In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.
On 18 July 2012, in a related criminal action brought by the US Attorney’s Office, Eastern District of Wisconsin, Schmickle was charged by information with one count of wire fraud, and that same day Schmickle entered into a plea agreement admitting the fraud.