Charles E. Hays, of Rosemount, Minnesota, has been ordered to pay over $84 million in penalties for operating a Ponzi scheme through his company, Crossfire Trading, LLC, according to a federal court order issued February 2, 2011.
Judge Donovan W. Frank of the U.S. District Court for the District of Minnesota, levied a $19,977,250 disgorgement order and a $64,779,751 civil monetary penalty against Hays and Crossfire. The scheme ran from January 2001 to February 2009 and involved fraudulently soliciting funds from investors.
The CFTC initially filed a complaint against Hays and Crossfire on February 5, 2009, alleging the misappropriation of customer funds, including the $4 million purchase of a yacht. The complaint also detailed registration violations and the provision of false account statements to investors.
Hays previously pleaded guilty to criminal charges related to the scheme on April 28, 2010, and was sentenced to 117 months in prison. He was also ordered to pay over $21 million in restitution to defrauded investors. In his plea, Hays admitted to losing or misappropriating approximately $20 million of the $40 million fraudulently obtained from investors.
Court findings revealed Hays misrepresented the performance of the commodity pool, violated customer investment agreements, and diverted funds for personal use. He created and distributed fraudulent monthly statements, falsely portraying investment gains and balances. He also falsely claimed funds were held in an account at a registered brokerage firm when no such account existed.
Like many Ponzi schemes, Hays used funds from new investors to pay earlier investors, creating the illusion of profitability. The CFTC collaborated with the U.S. Department of Justice and the U.S. Attorney’s Office for the District of Minnesota on this case.
Source: CFTC.gov
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