NEW YORK, NY – December 13, 2012 – Federal regulators have brought fraud charges against Abdul Sultan Walji and Reniero Francisco, both California residents, following an investigation into alleged investor fraud involving commodity futures and options trading. The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Southern District of New York on December 12, 2012.
The complaint alleges that Walji, Francisco, and their firm, Arista LLC, defrauded investors out of more than $9.5 million between February 2010 and January 2012. The defendants are accused of misappropriating funds, making false statements to investors, and submitting falsified reports to the National Futures Association (NFA). Arista LLC, a registered Commodity Pool Operator based in Newport Coast, California, also faces charges for failing to register with the CFTC during its first year of operation.
According to the CFTC, the defendants allegedly paid themselves $4.125 million in fees while losing over $4.8 million in trading. The scheme was perpetuated through the provision of false quarterly statements to investors and inaccurate reports to the NFA. One instance cited in the complaint details a September 2011 report falsely claiming a 99 percent rate of return when the actual return was negative 46.98 percent. The reported net asset value was also allegedly inflated from approximately $523,000 to $8,421,139.
U.S. District Court Judge Paul A. Engelmayer issued an ex parte restraining order freezing the defendants’ assets, allowing for expedited discovery, and preventing the destruction of records. A hearing on the CFTC’s motion for a preliminary injunction is scheduled for December 21, 2012.
In a parallel criminal case, the U.S. Attorney’s Office for the Southern District of New York has charged Walji and Francisco with conspiracy, securities fraud, and wire fraud. Walji faces an additional charge of commodities fraud. Both men were arrested in California by FBI agents. The CFTC is seeking restitution, penalties, trading bans, and permanent injunctions against further violations of federal commodities laws.
The CFTC acknowledged the assistance of the Department of Justice, the U.S. Attorney’s Office, the FBI, and the NFA in this matter.
Source: CFTC.gov
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