The US Commodity Futures Trading Commission (CFTC) has filed a civil complaint charging Michael Justin Hoopes of Rexburg, Idaho, with fraud and misappropriation in connection with a commodity futures Ponzi scheme that defrauded Idaho residents, among others.
On 25 October, 2011, the same day the complaint was filed in US District Court for the District of Idaho, Judge Edward J Lodge entered an emergency order freezing Hoopes’ assets and prohibiting the destruction of books and records. The judge set a hearing for 7 November, 2011.
Specifically, the CFTC complaint alleges that, from at least September 2007 to the present, Hoopes fraudulently solicited and accepted over USD2 million from at least 10 persons, most of whom were Idaho residents, for the purpose of trading stock index futures in Aspen Trading, LLC, a commodity pool that he operated. Hoopes also solicited and accepted an additional USD9.6 million from other mostly Idaho residents during the same period, of which at least USD673,429 was used for futures trading and at least USD1,706,663 was commingled with Hoopes’ personal funds, according to the complaint.
Hoopes fraudulently represented to at least two pool participants the potential for profit and the risk of loss of investing in Aspen Trading, claiming that they would earn 20 per cent annually on their investments, according to the complaint. Hoopes also allegedly falsely represented that his trading strategy minimised downside market risk, that he was earning annual returns well in excess of 25 per cent to 30 per cent, and that he had not lost any money in trading.
The complaint further alleges that Hoopes issued false account statements to at least one customer showing that the Aspen Trading account had a USD2.2 million balance. In reality, Hoopes allegedly had never opened a trading account in Aspen Trading’s name, and Hoopes had lost or misappropriated most of Aspen Trading’s customer funds that he received. Hoopes allegedly used at least USD151,693 of misappropriated customer funds for personal expenses, including credit card, car, and loan payments. Hoopes also made payments of purported profits totaling USD594,339 to participants, as is typical of a Ponzi scheme, according to the complaint.
In its continuing litigation against Hoopes, the CFTC seeks a return of ill-gotten gains, restitution to defrauded customers, a civil monetary penalty, permanent trading and registration bans, and a permanent injunction against further violations of federal commodities law.
