WASHINGTON, D.C. – Enrique F. Villalba, of Cuyahoga Falls, Ohio, was implicated in a multi-million dollar commodity futures Ponzi scheme, according to a settlement announced today by the U.S. Commodity Futures Trading Commission (CFTC). The CFTC filed charges against Rosenthal Collins Group, LLC (RCG), a Chicago-based futures commission merchant, for failing to adequately supervise the account used by Villalba to perpetrate the fraud.
The CFTC’s order details that from April 1, 2006, to April 29, 2009, RCG neglected its duty to diligently supervise the handling of the account held in the name of Money Market Alternative, LP (MMA), which Villalba used for the Ponzi scheme. The agency previously sued Villalba and MMA on March 29, 2010, regarding the fraudulent operation (CFTC Press Release 5801-10).
Investigators found RCG failed to adhere to its own compliance procedures, which required ongoing efforts to “know” its customers and report “any suspicious money transfers, non-economic transactions, and other activity outside of the ordinary course of business.” Despite significant increases in deposits into the MMA account – exceeding $2 million in 2006, $3 million in 2007, and $14 million in 2008 – and losses exceeding $17 million, RCG did not investigate or report the unusual activity.
MMA initially reported a net worth of $300,000 and an annual income of $45,000, yet the account saw massive inflows. RCG’s supervisory system was found to be inadequate as those reviewing the account lacked access to, and knowledge of, the initial financial information provided by MMA. The firm also failed to adequately respond to CFTC document requests during the investigation into Villalba and MMA’s scheme.
As a result of the settlement, RCG will pay a $1.6 million civil monetary penalty and disgorge $921,260.90 to Villalba’s victims – representing the commissions and fees earned by RCG and its introducing broker on the MMA account. The settlement was announced on April 12, 2012.
“This case reflects the CFTC’s resolve to hold FCMs liable for failing to adhere to their supervisory obligations,” stated David Meister, Director of the CFTC’s Division of Enforcement. “Even if an FCM does not knowingly assist in a Ponzi scheme conducted by an account holder, an FCM cannot ignore questionable transactions that stand out as red flags of fraudulent conduct, particularly when those flags should have been obvious under the FCM’s own policies and procedures.”
Source: CFTC.gov
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