The US Commodity Futures Trading Commission (CFTC) has obtained more than USD700,000 in restitution and civil monetary penalties in a federal court order against Jeffrey Shalhoub of Staten Island, NY, and his company, Jeff Shalhoub Investments (JSI) of Long Island City, NY, in connection with the fraudulent operation of a commodity futures Ponzi scheme.
The consent order, entered by the Honorable Joanna Seybert of the US District Court for the Eastern District of New York on February 23, 2011, requires Shalhoub to pay USD241,900 in restitution and a USD463,500 civil monetary penalty. The order also permanently bars Shalhoub from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.
Specifically, the order finds that, from at least July 2008 to January 2009, Shalhoub, as a commodity pool operator of a pool called The 9 Group, solicited USD300,000 from 12 of his then-wife’s friends and family to trade futures. Shalhoub opened a trading account in his name and deposited approximately USD146,000 of customer money into the account. Customer funds were transferred through JSI’s bank account and commingled with Shalhoub’s personal funds. Shalhoub misappropriated USD154,500 of customer funds for personal use, including to pay for computer and golfing equipment, clothing, car payments on a Land Rover and a USD3,500 tab at a Manhattan restaurant.
The consent order finds that Shalhoub falsely promised customers a monthly 10 percent to 36 per cent return, while misrepresenting that the customer’s original investment could be returned at any time. To conceal and perpetuate his fraud, Shalhoub provided customers with false account statements misrepresenting that their accounts were increasing by as much as 5.2 per cent per week when, in fact, the accounts were collectively losing money every month. Shalhoub paid purported profits to customers from their original principal or from money invested by new customers, in a manner similar to a Ponzi scheme.