CFTC secures $2.5m judgment against operator of fraudulent commodity pool scheme
The order requires Richard D. Carter, principal of Blue Guru, to pay restitution totaling $838,642 and a civil monetary penalty of $1.76 million.
The United States Commodity Futures Trading Commission (CFTC) has just announced that it has obtained a $2.5 million order against Richard D. Carter in connection with a $1.76 million commodity pool fraud operated by Blue Guru, LLC. The Northern District of Illinois entered a Consent Order for Permanent Injunction on January 8, 2020, against Carter.
According to the order, Carter will have to pay restitution totaling $838,642 and a civil monetary penalty of $1,760,022. The order also imposes permanent trading and registration bans on Carter and prohibits him from violating provisions of the Commodity Exchange Act (CEA).
Let’s recall that, on January 12, 2018, the CFTC charged Carter, co-defendant Mark R. Slobodnik, and Blue Guru, LLC with fraud, misappropriation, and failing to register with the CFTC.
The order finds that from April 2014 to January 2018, Carter misrepresented material facts to Blue Guru pool participants and prospective pool participants concerning the profitability of their participation interests in the commodity pool. Carter misleadingly claimed that pool funds would be used to trade futures, including the Dow Jones E-mini and the S&P 500 E-mini contracts on the CME, but, in reality, the defendants used less than two-thirds of the $1.76 million they received for trading.
Carter also informed prospective participants that they would earn 8% per year on their investment plus 50% of any gross net trading profits, and he issued false account statements reflecting illusory quarterly gains. In fact, Blue Guru incurred more than $500,000 in trading losses, half of which Carter directly caused.
Further, the order finds that Carter misappropriated $586,674 of participants’ funds, ignored withdrawal requests, and lied about conditions that purportedly prevented defendants from making disbursements.
On November 13, 2018, the court entered a consent order of permanent injunction against defendant Slobodnik, requiring him to pay restitution of $280,000, disgorgement of $45,342, and a civil monetary penalty of $45,342. On May 1, 2018, a default judgment was entered against Blue Guru, ordering it to pay restitution of $1.4 million, disgorgement of $1.4 million, and a civil monetary penalty of $4.2 million.
On August 27, 2019, Carter pleaded guilty to wire fraud in a related criminal proceeding. He is scheduled to be sentenced on February 13, 2020.
Unfortunately, orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.