CFTC charges Peter Kambolin’s FX and Crypto business SAM for profiting off customers losses
“As alleged, the defendants promised customers investment opportunities would be allocated fairly and equitably among customer accounts and proprietary accounts. In reality, the defendants took most of the profits and gave the losses to their customers.”
The Commodity Futures Trading Commission has charged Systematic Alpha Management, LLC (SAM) for unfairly allocating trades between certain commodity pools and managed account customers and certain of their proprietary accounts.
SAM is a registered commodity trading advisor (CTA) and commodity pool operator (CPO) owned and led by Peter Kambolin, who is subject to the same charges.
Case against SAM based on CFTC’s “effective data analysis capabilities”
Both defendants are also charged with making misrepresentations to pool participants and managed account customers and violating CFTC regulations governing the allocation of trades.
According to the CFTC, SAM and Kambolin defrauded pool participants and managed account customers, and generated at least $1,451,559 in total trading profits for their proprietary accounts.
The regulator seeks monetary penalties, disgorgement, restitution, registration and trading bans, and a permanent injunction against the defendants.
CFTC Director of Enforcement Ian McGinley said: “As alleged, the defendants promised customers investment opportunities would be allocated fairly and equitably among customer accounts and proprietary accounts. In reality, the defendants took most of the profits and gave the losses to their customers. The CFTC will aggressively pursue advisors and intermediaries who defraud their customers for their own personal gain, no matter what form it takes. This action further demonstrates the CFTC’s effective data analysis capabilities to proactively identify and prosecute misconduct.”
SAM allegedly profited $1.4m+ off customers’ $1.5m+ losses
Peter Kambolin told customers SAM offered customers automatic, algorithm-based trading strategies involving futures, which customers could participate in either through commodity pools or managed accounts.
Between January 2019 and November 2021, one pool was allegedly focused on trading various exchange-listed cryptocurrency futures contracts, and another focused on trading various exchange-listed foreign exchange (FX) futures contracts.
The defendants also traded for at least four individual managed accounts. The defendants often executed trades for these commodity pools and managed accounts together with trades they executed on behalf of their proprietary accounts, and then allocated the trades among all of the accounts at the end of each trading day.
According to the CFTC, during that time, SAM and Peter Kambolin “unfairly and inequitably allocated trades between the commodity pools and managed accounts and their proprietary accounts” by consistently allocating trades they knew were profitable to their proprietary accounts, while allocating unprofitable or less profitable trades to the commodity pools and managed accounts.
This behavior caused the commodity pools and managed accounts to incur net trading losses of more than $1.5 million, and generated more than $1.4 million in profits for their proprietary accounts.