Brad L Demuzio and his company Demuzio Capital Management (DCM), both of Chubbuck, Idaho, are to pay over USD3m for operating a fraudulent USD1.8m commodity pool and foreign currency Ponzi scheme.
The consent order and order of default judgment impose a permanent injunction against Demuzio and DCM, respectively, finding that the defendants violated the anti-fraud provisions of the Commodity Exchange Act and failed to register with the CFTC as commodity pool operators (CPOs).
In addition to the permanent injunction, the final orders each impose permanent trading and registration bans against Demuzio and DCM and order them to jointly pay restitution of USD805,273. In addition, under terms of the final orders Demuzio is required to jointly pay a USD1m civil monetary penalty, and DCM is ordered to jointly pay a civil monetary penalty of USD2,415,819.
The final orders find that from at least 18 June 2008 through November 2011, Demuzio, through DCM, solicited and accepted approximately USD1.8m from at least 16 investors to trade forex through a pooled investment vehicle. The final orders find that the defendants misappropriated investor funds to pay Demuzio’s personal expenses and sent emails to investors that falsely represented that their principal remained intact and was earning profits. The final orders also find that the defendants acted as a CPO without being registered as such.
In a related criminal proceeding based on substantially the same facts, Demuzio pleaded guilty in the US District Court for the District of Idaho to one count of wire fraud. Sentencing is scheduled for 5 November 2012.