Jeffrey Shalhoub, of Staten Island, New York, was ordered to pay over $700,000 in restitution and penalties for operating a fraudulent commodity futures Ponzi scheme, the U.S. Commodity Futures Trading Commission (CFTC) announced March 1, 2011. The federal court order, entered on February 23, 2011, by Judge Joanna Seybert of the U.S. District Court for the Eastern District of New York, brings a close to a case initially highlighted in CFTC Press Release 5826-10 on May 19, 2010.
Shalhoub, operating through his company Jeff Shalhoub Investments (JSI) of Long Island City, New York, was found to have misappropriated funds from investors in a scheme known as “The 9 Group.” Between July 2008 and January 2009, Shalhoub solicited $300,000 from 12 individuals – friends and family of his then-wife – with promises of high returns on futures trading.
According to the consent order, approximately $146,000 of the customer funds was deposited into a trading account opened in Shalhoub’s name. However, these funds were commingled with his personal accounts and $154,500 was used for personal expenses, including purchases of computer and golfing equipment, clothing, car payments for a Land Rover, and a $3,500 bill at a Manhattan restaurant.
Shalhoub falsely advertised monthly returns ranging from 10 to 36 percent and claimed investors could withdraw their principal at any time. He further concealed the scheme by providing fabricated account statements showing weekly gains of up to 5.2 percent, despite the accounts collectively losing money each month. The operation functioned as a classic Ponzi scheme, with early investors paid with funds from new investors or their original principal.
The court order requires Shalhoub to pay $241,900 in restitution to the defrauded investors and a $463,500 civil monetary penalty. Additionally, Shalhoub is permanently barred from engaging in any commodity-related activity and is prohibited from registering with the CFTC.
The CFTC’s Division of Enforcement staff members Elizabeth Davis, Jessica Harris, Michael Loconte, Erica Bodin, Kenneth McCracken, Rick Glaser and Richard Wagner were responsible for the case.
Source: CFTC.gov
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