HOUSTON, TX – August 26, 2013 – David DiPasquale, Chief Executive Officer of Velocity Futures, LLC, faces penalties following a U.S. Commodity Futures Trading Commission (CFTC) settlement regarding financial reporting violations. The CFTC issued an order today detailing charges against Velocity Futures, LLC, a registered Futures Commission Merchant (FCM) based in Houston, Texas, for failing to comply with minimum financial requirements.
The investigation revealed Velocity Futures failed to accurately account for events related to two $2 million arbitration awards issued by the National Futures Association (NFA) on June 16, 2011, against both the company and DiPasquale. Velocity settled the awards, with DiPasquale agreeing to pay $1 million over 24 months, and Velocity covering the initial $1 million lump sum payment. While the initial payment was properly recorded, Velocity improperly paid the remaining installments on behalf of DiPasquale, citing indemnification claims.
The CFTC determined it was reasonably probable, under generally accepted accounting principles, that the $1 million in deferred payments owed by DiPasquale should have been recorded as a liability on Velocity’s financial statements. Additionally, the company improperly classified an $800,000 cash infusion from its parent company as a subordinated loan, despite lacking the required NFA approval for such an agreement. This misclassification allowed Velocity to falsely inflate its adjusted net capital.
As a result of these accounting discrepancies, Velocity Futures failed to meet its minimum adjusted net capital requirement for a period of 264 days, spanning from June 16, 2011, to March 6, 2012. The CFTC order imposes a $300,000 civil monetary penalty on Velocity Futures and issues a cease and desist order to prevent further violations.
The CFTC acknowledged the assistance provided by the NFA during the investigation. The case was led by CFTC staff members Tom Simek, Jeff Le Riche, Rick Glaser, and Richard Wagner, with additional support from Tom Bloom, Kurt Harms, Jan Ripplinger, and Lauren Fulks of the CFTC’s Division of Swap Dealer and Intermediary Oversight.
Source: CFTC.gov
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