“Failing health and negative net worth”: 63-year old trader objects to proposed monetary penalty

Shortly after the United States Commodity Futures Trading Commission (CFTC) said it would seek the imposition of a civil monetary penalty of $1,083,038 on self-proclaimed commodity futures trader William H. Powderly IV, the defendant has voiced his objections regarding the size of the proposed penalty.

According to the latest filings in this case, seen by FinanceFeeds, Powderly says the penalty is excessive and that the Court should deny the CFTC’s request. In fact, the defendant says that “the CFTC is attempting to impose a civil monetary penalty so high as to constitute a financial life sentence”.

Let’s recall that the case against Powderly was launched in May 2017. He was charged with fraudulently soliciting money for purposes of trading commodity futures on behalf of clients in an account in Powderly’s name. The Complaint also charged Powderly with making and providing false and misleading account statements to his customers.

In particular, the Complaint alleges that from at least January 2016 through October 2016, Powderly solicited customers and prospective customers by claiming that he and a university professor had developed a commodity futures trading program that generated exceptional hypothetical trading results and that “beta” testing of this system generated consistent gains without a single day of loss.

The Complaint further alleges that when soliciting customers and prospective customers, Powderly failed to tell them that the actual commodity trading he conducted for his commodity account during that 10-month period was consistently unprofitable, sustaining losses every month during that time. Additionally, the Complaint alleges that Powderly created false account statements for his trading account and sent them to his customers in order to conceal his trading losses.

According to the Complaint, Powderly accepted approximately $1,278,000 from seven customers and subsequently concealed that he had incurred losses of $1 million while he reported he was generating profits.

In August this year, the CFTC informed the Court that a partial settlement had been reached in the case. To effect the partial settlement, the defendant agrees to the entry of a Consent Order of Permanent Injunction and to pay restitution in the amount of $1,069,300.

In the latest Court filings, the defense counsel argues:

“At the age of 63, Defendant Powderly is in failing health and has a negative net worth of $291,000”.

According to the defense counsel, Powderly’s net worth coupled with the restitution he has agreed to pay would make the Court’s imposition of a civil penalty futile, as he simply cannot pay both.

That is why, the defendant asks that the court consider his inability to pay a civil penalty and deny the CFTC’s request for a civil penalty.

At the Court’s instance, status hearing in this case has been reset to December 6, 2018. The case is captioned US Commodity Futures Trading Commission v. Powderly IV (1:17-cv-03262).