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CFTC charges Illinois defendants with commodity pool fraud

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The US Commodity Futures Trading Commission has obtained an emergency federal court order freezing the assets of defendants Jay C. Nolan of Wilmette, Ill. and his company Lodge Capital Group, an Illinois limited liability company based in Northfield, Ill.

The court’s order, entered by the Honorable Charles R. Norgle, Sr. of the US District Court for the Northern District of Illinois, also prohibits the destruction of books and records.

The order sets a hearing on 9 February 2010 on the CFTC’s motion for a preliminary injunction.

The court’s order stems from a CFTC civil enforcement action filed on 25 January 2010, charging Nolan and Lodge Capital with fraud in connection with the operation of a commodity pool.

According to the complaint, from at least December 2004 to the present, the defendants fraudulently solicited approximately USD3.9m from at least five individuals.

In their solicitations, the complaint charges that Nolan and Lodge Capital made misrepresentations and failed to disclose material facts to pool participants regarding the profitability of the pool and the performance of the participants’ investments in the pool.

The complaint further alleges that the defendants sent false account statements to participants that misrepresented the value of the participants’ interests in the commodity pool and the assets and liabilities of the pool. Finally, Nolan allegedly misappropriated some of the pool participant’s monies in the form of incentive fees to which he was not entitled because of the pool’s sustained overall losses.

In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution to defrauded customers, civil monetary penalties and permanent injunctions prohibiting the defendants from violating federal commodity laws and from engaging in further trading.

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