Oscar Hernandez of Miami, Florida and his companies, Midway Trading Company and Conquest Investment Group, are to pay a USD1.4m civil monetary penalty to settle CFTC charges that they operated a multi-million dollar commodity pool Ponzi scheme and misappropriated customer funds for personal use.
The consent order of permanent injunction was entered on 27 September 2012 by Judge Robin S Rosenbaum of the US District Court for the Southern District of Florida.
The order also imposes permanent trading and registration bans against the defendants and permanently prohibits the defendants from further violations of the Commodity Exchange Act, as charged.
Specifically, the order finds that, beginning in or about 2005 and continuing through about December 2008, the defendants fraudulently solicited over USD3.8m from pool participants by telling them that Hernandez had developed a risk-free commodity trading system that would guarantee annual returns of from 20 per cent to 60 per cent.
Defendants misappropriated approximately USD1m of those funds to pay for personal expenses, including mortgages, luxury car payments, and American Express bills, the court’s order finds.
In a related criminal proceeding in November 2011, Hernandez pleaded guilty to conspiracy to commit securities and commodities fraud. In March 2012, Hernandez was sentenced to 57 months imprisonment and ordered to pay restitution to pool participants.