Mesa, Arizona resident Derek Springfield and his company, Draven, LLC, have been ordered to pay over $2.2 million in restitution and penalties for defrauding commodity pool investors, the Commodity Futures Trading Commission (CFTC) announced today. U.S. District Court Judge David G. Campbell for the District of Arizona entered a Consent Order on November 13, 2017, finding Springfield and Draven guilty of fraudulent solicitation and misappropriation of funds.
The CFTC originally filed its enforcement action on December 13, 2016. The investigation revealed that between June 2012 and December 2016, Springfield and Draven fraudulently solicited at least $1.8 million from approximately 112 investors, promising segregated accounts and expert trading in futures, forex, and options markets. However, the Order states the defendants never traded the funds as advertised.
Instead, investor funds were pooled into two commodity pools, with only a small percentage actually being traded. Trading conducted by Springfield resulted in net losses of approximately $195,880. Despite these losses, Draven deducted 10% management fees based on purported profits. The Order details that Springfield and Draven misappropriated customer funds to cover corporate expenses, personal expenses, and withdrawal requests from other clients. Springfield allegedly used investor money for mortgage payments, food, shopping, and medical bills.
To conceal the losses and misappropriation, the defendants fabricated false account statements showing profitable trading results. These statements did not reflect the actual trading performance. Furthermore, the scheme operated as a Ponzi scheme, using funds from new investors to pay returns to existing investors requesting withdrawals.
The Consent Order mandates that Springfield and Draven, jointly and severally, pay $1,487,964.45 in restitution to defrauded customers and a $800,000 civil monetary penalty. Both are permanently banned from trading and registering with the CFTC, and are prohibited from violating the Commodity Exchange Act and CFTC Regulations in the future.
Source: CFTC.gov
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