Daniel Hewko of Irvine, California, has been ordered to pay over $7.6 million in restitution and penalties for defrauding investors, the Commodity Futures Trading Commission (CFTC) announced October 13, 2022. The U.S. District Court for the Central District of California issued a default order on August 22, 2022, finding Hewko and his company, Main & Prospect Capital, LLC, liable for fraud, misappropriation of investor funds, and failure to register with the CFTC.
The CFTC initially filed its complaint against Hewko, his father Daniel Hewko (who reached a separate consent order in June), and Main & Prospect Capital on November 13, 2019. The case centered around the “Global Opportunity Fund,” a pooled investment vehicle operated by MPC and marketed to investors starting in August 2014.
According to the court order, Hewko and MPC collected over $1.1 million from investors between September and November 2014, transferring the funds into a futures trading account. While some limited trading of crude oil and E-mini S&P futures contracts occurred, the majority of the funds were not used as represented to investors.
From January 2016 through the third quarter of 2018, Hewko and MPC issued quarterly statements falsely claiming investment returns. The Fund actually suffered losses during this period, but investors received fabricated account statements showing significant, but untrue, growth. Investigators found Hewko and MPC knew the statements were false, as the fund never generated any actual profits.
The court found that Hewko misappropriated investor funds for his personal benefit, the benefit of his family, and for unrelated companies he owned or controlled. Hewko owned and managed MPC, signing documents on behalf of the company and controlling its futures trading account, all while failing to register with the CFTC as an associated person of a commodity pool operator. MPC also failed to register as a commodity pool operator.
The default order requires Hewko and MPC to pay $1,906,395 in restitution to the victims of the scheme and a $5.7 million civil monetary penalty. They are also permanently banned from violating the Commodity Exchange Act (CEA) and CFTC regulations, and from engaging in any future trading or registration activities.
The CFTC cautions that victims may not fully recover their losses, as Hewko and MPC may lack sufficient assets. The agency states it will continue to pursue accountability for those who harm market participants.
Source: CFTC.gov
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