US Court orders commodity futures trader to pay penalty of over $1m
The Illinois Northern District Court has granted the CFTC’s request that William H. Powderly IV pays a civil monetary penalty of $1,083,138.
A case brought by the United States Commodity Futures Trading Commission (CFTC) ended on Tuesday, March 5, 2019, after the Illinois Northern District Court ordered self-proclaimed commodity futures trader William H. Powderly IV to pay a civil monetary penalty of $1,083,138.
The size of the penalty is equal to that requested by the CFTC.
Let’s recall that in August 2018, the CFTC informed the Court that a partial settlement had been reached in the case. To effect he partial settlement, the defendant agrees to the entry of a Consent Order of Permanent Injunction. The proposed order permanently prohibits the defendant from (inter alia):
- cheating or defrauding, or attempting to cheat and defraud, other persons;
- using or employing any manipulative device or contrivance to defraud;
- entering into transactions involving commodity interests;
- having any commodity interests traded on his behalf;
- soliciting, receiving or accepting funds from any person for the purchasing or selling commodity interests;
- applying for registration or claiming exemption from registration with the Commission in any capacity;
- acting as a principal, agent or employee of any person registered, exempted from registration or required to be registered with the Commission.
According to that settlement, the defendant is also to pay restitution in the amount of $1,069,300.
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.