Madison, WI – Edward S. Walczak was found liable for fraud by a jury in the U.S. District Court for the Western District of Wisconsin on April 15, 2022, following a five-day trial. The Commodity Futures Trading Commission (CFTC) brought the action against Walczak on January 27, 2020, alleging he misrepresented risk management practices within the Catalyst Hedged Futures Strategy Fund.
The jury determined Walczak engaged in conduct constituting fraud or deceit upon investors, potential investors, and investment advisors, violating Section 4o(1)(B) of the Commodity Exchange Act (CEA). However, the jury found Walczak not liable for violations of CEA Sections 4o(1)(A) and 6(c)(1), as well as CFTC Regulation 180.1.
The CFTC’s case was combined with a parallel action brought by the Securities and Exchange Commission (SEC) concerning the same conduct. Vincent McGonagle, Acting Director of Enforcement for the CFTC, emphasized the importance of truthful disclosures to protect investors, stating the agency is “committed to holding accountable individuals that misstate the risks of investing in their products.”
Further proceedings are pending to determine appropriate sanctions and penalties against Walczak. The CFTC staff involved in the case included Sam Wasserman, Peter Janowski, Meredith Borner, David Acevedo, Michael Cazakoff, John Buffington, Shantel Ogbuagu, Shelley Evans, and former staff member Candice Aloisi. Dawn Miller provided technical support during the trial.
The outcome of this case signals continued regulatory scrutiny of fund managers and a focus on ensuring transparency in investment strategies.
Source: CFTC.gov
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