John David Stroud, a commodities trader formerly based in Auburn, Alabama, has been ordered to pay over $4.7 million in restitution and penalties following a CFTC enforcement action. Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa entered a summary judgment on March 1, 2016, requiring Stroud and his companies – Stroud Capital Management, LLC, TS Capital Partners, LLC, and TS Capital Management, LLC – to jointly pay $2,379,923.27 in restitution and a $2,343,323.27 civil monetary penalty.
The ruling stems from a CFTC complaint filed in 2012, alleging fraud and misappropriation related to the operation of two commodity pools. According to the court order, Stroud accepted $4,888,442.43 from investors but misappropriated $2,343,323.27 of those funds and lost an additional $1,175,180.10 through trading. Despite these losses, Stroud repeatedly misrepresented the profitability of his trading to both potential and existing investors.
The court found that Stroud provided falsified bank statements to employees of TS Capital Management, who were also investors, inflating the pool account balance to conceal the true financial state. These fabricated statements presented a misleading picture of the pool’s performance.
This judgment comes in addition to a criminal conviction. On August 23, 2013, Stroud pleaded guilty to one count of securities fraud in Alabama. He was subsequently sentenced to 10 years in prison on November 18, 2013, and ordered to pay $2,148,273.61 in restitution as part of that criminal case (State of Alabama v. Stroud, Case No. 43-CC-2012-000599).
The CFTC notes that restitution orders do not guarantee victims will recover their losses, as wrongdoers may lack sufficient assets. The agency is committed to pursuing accountability for those who violate commodity trading laws.
The CFTC acknowledged the assistance of the Alabama Securities Commission, the National Futures Association, and the U.S. Attorney’s Office for the Middle District of Alabama in this case. Stephanie Reinhart, Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, and Rosemary Hollinger of the CFTC’s Division of Enforcement were responsible for the action.
Source: CFTC.gov
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