Nathan Schleifer and his company, Galileo Trading, LLC (Galileo) are to pay more than USD1.6 million to settle US Commodity Futures Trading Commission (CFTC) charges that they fraudulently solicited customers to trade commodity futures.
Schleifer and Galileo will jointly pay restitution to defrauded customers of USD1,150,618.28, a USD420,000 civil monetary penalty, and USD38,022 in disgorgement of ill-gotten gains. The CFTC has also imposed permanent registration and trading bans on Schleifer and Galileo and they must cease and desist from further violations of the Commodity Exchange Act, as charged.
The CFTC charges sate that from at least 1999 through 2014, Schleifer and Galileo fraudulently obtained at least USD2.8 million from numerous individuals for the purported purpose of trading a pooled investment in commodity futures and managing customers’ futures trading accounts, the Order finds.
The CFTC finds that from at least 1999 through 2014, Schleifer and Galileo fraudulently obtained at least USD960,000 from numerous individuals (pool participants) for the purported purpose of trading a pooled investment in commodity futures on a designated contract market, by misrepresenting to pool participants that they had achieved past success trading futures, when they had never actually done so, and that they were achieving enormous profits trading on their behalf, when in fact their trading resulted in significant losses.
Specifically, in soliciting customers, Schleifer falsely claimed he was a highly skilled money manager and an experienced commodities trader, guaranteed minimum returns, and assured customers that their money would be safe, the Order finds.
Additionally, the CFTC finds that Schleifer and Galileo issued false account statements and tax forms showing purported profitable results. When at least one customer tried to withdraw funds, Schleifer claimed to have lost their money during the May 6, 2010 “flash crash”, but later admitted he had lied and had actually lost all the money trading years earlier. According to the CFTC, most of the pool participants’ funds were never returned.
Schleifer, on behalf of Galileo, also solicited over USD1.8 million from 11 individuals for Galileo to manage in at least 12 futures trading accounts by making similar material misrepresentations and omissions, the Order finds. For example, despite claiming to be a profitable trader, between 2008 and October 2014, Schleifer did not have a single profitable year trading futures in his or his clients’ accounts, according to the Order. And, the Order further finds that Schleifer knowingly and consistently provided false information about his past trading performance or omitted material facts about prior losses to his clients to gain their business.
The CFTC further finds that Schleifer made numerous false statements and misrepresentations to the National Futures Association (NFA) during routine NFA audits, including falsely stating that Galileo had no clients and did not trade on anyone’s behalf.