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CFTC orders Northstar and founder to pay more than USD11m to settle anti-fraud action

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The US Commodity Futures Trading Commission (CFTC) has filed and simultaneously settled charges against James M Peister and his company, Northstar International Group, (Northstar), that they defrauded commodity pool participants by concealing trading losses and using participants’ funds to make payments to other participants and for business and personal expenses. Peister resides in St. James, NY, and Northstar is located in Oceanside, NY.

The CFTC order, entered on February 3, 2011, requires respondents jointly and severally to pay USD10,323,195.23 in restitution and a USD1 million civil monetary penalty. The order also permanently prohibits Peister from trading on or subject to the rules of any registered entity and requires him to comply with certain undertakings, including never applying for registration with the CFTC.

The CFTC order finds that, beginning in 2001 and continuing through early 2009, Northstar, an exempt commodity pool operator (CPO), and Peister, acting as an associated person (AP) of Northstar, operated a commodity pool, the North American Globex Fund, LP (Globex Fund). Peister, acting as an unregistered CPO, operated another commodity pool, the North American Globex Group, Inc. (Globex Group).

According to the order, Peister and Northstar solicited more than USD19 million from approximately 72 individuals to participate in the Globex Fund. Peister transferred substantial Globex Fund monies to Globex Group for investment by the Globex Group, according to the order. Beginning in late 2001, the respondents sustained substantial trading losses with the Globex Group and failed to disclose fully and accurately all the losses to the Globex Fund pool participants. The order also finds that respondents concealed those losses by issuing or causing to be issued false monthly account statements and audit reports for the Globex Fund. As they were sustaining and concealing the trading losses, respondents continued to solicit prospective pool participants and additional investment from existing pool participants, the order finds.

Peister, through Northstar, used pool participants’ funds to make redemptions to other participants and used approximately USD1 million of Globex Fund/Group participants’ monies to pay business and personal expenses while concealing the mounting losses. The order further finds that Peister failed to register with the CFTC as a CPO and failed to provide Globex Group participants with required disclosure documents.

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