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Virginia man charged with stealing USD1m from investors in Ponzi scheme

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The US Commodity Futures Trading Commission has charged John M.

The US Commodity Futures Trading Commission has charged John M. Donnelly of Charlottesville, Virginia, with operating a Ponzi scheme involving more than USD10m in connection with three commodity futures pools.

The CFTC’s complaint, filed on 11 March 2009, charges Donnelly, along with three legal entities he created, Tower Analysis, Nasco Tang and Nadia Capital, with misappropriating at least USD1m and committing other types of fraud.

In conjunction with the CFTC’s filing, the Honorable Glen E. Conrad of the US District Court for the Western District of Virginia issued a restraining order freezing the defendants’ assets and preserving records.

Judge Conrad set a hearing on the CFTC’s motion for preliminary injunction on 24 March 2009.

The CFTC complaint alleges that Donnelly solicited individuals to invest in US Treasury Note futures and S&P 500 futures. It further asserts that Donnelly operated three commodity pools for over seven years; however, neither Donnelly, nor any employee or agent of the other proposed defendants, actively traded the pools’ funds.

Despite representations that his trading strategy required daily trading of the accounts, Donnelly only executed seven trades over the course of seven years. Despite the absence of trading, the investors still lost their funds because Donnelly misappropriated at least USD1m for himself and his wife.

Donnelly may have received another USD1.7m from pool funds to which he was not entitled.

According to the complaint, Donnelly concealed the fraud by paying off certain investors with other investor funds and by issuing false account statements to the investors, lulling them into the belief that their principal was earning steep profits.

Donnelly is also being charged with failure to register as a commodity pool operator.

The CFTC named as relief defendants the two commodity pools, Blue Logic Operating Partners and Nadia Capital Operating Partners, in order to preserve any assets that may still exist. Also named as a relief defendant is Donnelly’s wife, Deborah B. Donnelly.

In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws and against further trading.

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