Commodity pool fraudsters get to pay more than $11 million in penalties

The United States Commodity Futures Trading Commission (CFTC) has earlier today announced that it secured an Order of default judgment and permanent injunction against defendants Scott Allensworth (d/b/a Capital Growth Group Associates and Cobra Development Group LLP), of Newhall, California, and his California company E-Slate, Inc. (d/b/a Cobra Development Group LLP), Robert J. Fusco, of Henderson, Nevada, and David Weddle of Prospect, Kentucky, in connection with two separate fraudulent commodity pool trading schemes.

The Order, entered by Judge Consuelo B. Marshall of the U.S. District Court for the Central District of California, finds that the fraudulent schemes operated over four years and defrauded 76 victims out of almost $3 million. Most of the victims were existing tax and retirement-planning clients, who had their relationship of trust, along with their intimate financial information, exploited. In carrying out the schemes, the defendants fraudulently solicited pool participants, misappropriated pool participant funds, and fabricated trading statements to prolong and conceal their misconduct.

The Order requires Allensworth, E-Slate, and Fusco, jointly and severally, to pay $268,000 in restitution to defrauded pool participants and a civil monetary penalty of $804,000. The order also requires Allensworth, E-Slate, and Weddle, jointly and severally, to pay $2,527,874 in restitution to defrauded pool participants and a civil monetary penalty of $7,583,623. The Order also imposes permanent trading and registration bans on all the defendants and prohibits them from committing further violations of the Commodity Exchange Act and CFTC Regulations, as charged in the Complaint filed on October 2, 2017.

On the downside, the CFTC warns that 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.

In a similar matter last week, the New York Southern District Court issued an Order of Final Judgment by Default for Permanent Injunction, Civil Monetary Penalties, and Other Statutory and Equitable Relief against Wright Time Capital Group LLC (WTGG), doing business as Global FX Club. The CFTC had filed a Complaint charging defendants Michael S. Wright and WTCG, aka Global FX Club, with violations of the Commodity Exchange Act and Commission Regulations. According to the Complaint, from approximately 2010 through June 2017, WTCG fraudulently solicited pool participants to invest in a commodity pool for forex trading.

The Court ordered WTCG to pay a civil monetary penalty in the amount of $1,113,750, plus post-judgment interest. The defendant will also have to pay restitution in the amount of $371,250.