Jeffrey L. Groendyke, of Middleville, Michigan, has been permanently barred from commodity-related activities and ordered to pay $1.38 million in restitution and penalties after being found liable for fraud and operating a Ponzi scheme, the U.S. Commodity Futures Trading Commission (CFTC) announced on December 19, 2011.
The federal consent order, entered by Judge Robert J. Jonker of the U.S. District Court for the Western District of Michigan, requires Groendyke to pay $963,141 in restitution to the 42 individuals he defrauded, as well as a $420,000 civil monetary penalty. Groendyke operated under the business name JG Forex Fund.
The CFTC initially filed an anti-fraud enforcement action against Groendyke in May 2011, alleging he misappropriated funds received from investors for off-exchange foreign currency (forex) trading. The court found that Groendyke fraudulently solicited $1,009,844 from investors with the promise of forex trading, but only used $366,950 for actual trading – resulting in a $324,228 loss.
Instead of using investor funds solely for trading, Groendyke engaged in a Ponzi scheme, using $46,703 of incoming funds to pay purported profits to earlier investors. An additional $501,510 was diverted to third parties for non-trading purposes, and Groendyke personally spent $131,899 on personal expenses, including computer equipment, rent, groceries, restaurants, hotels, and retail merchandise. He failed to disclose these uses of investor funds.
Furthermore, the court found that Groendyke failed to register with the CFTC as a commodity pool operator, a violation of federal law. The CFTC stated they appreciated the assistance of the U.S. Attorney’s Office for the Western District of Michigan in the case.
Source: CFTC.gov
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