John David Stroud of Auburn, Alabama, is facing charges of fraud and misappropriation following a CFTC enforcement action filed in the U.S. District Court for the Middle District of Alabama on March 5, 2012. The complaint alleges Stroud, along with his companies Stroud Capital Management, LLC, TS Capital Partners, LLC, and TS Capital Management, LLC, fraudulently obtained at least $4.8 million from at least 17 individuals between February 2008 and the present.
According to the CFTC, Stroud misrepresented his trading success and the profitability of the Stroud Capital Fund, L.P. and the TS Capital Fund, L.P. commodity pools to solicit investments. However, trading records show Stroud lost over $1.1 million trading commodity futures and foreign currency between August 2008 and October 2011. Furthermore, the complaint details the misappropriation of more than $2.2 million in pool participant funds for personal expenses, including car payments, travel, entertainment, and retail purchases.
To conceal the alleged scheme, Stroud and his companies are accused of sending false account statements, tax records, and even falsified bank statements to pool participants, failing to disclose trading losses and the misuse of funds. The CFTC also alleges that Stroud and TS Capital Management intentionally misled the National Futures Association (NFA) during audits in April and October 2011, claiming to trade only proprietary funds and misrepresenting the amount of assets under management.
On March 7, 2012, U.S. District Court Judge Myron H. Thompson issued an emergency restraining order freezing the defendants’ assets and prohibiting the destruction of records. A hearing is scheduled for March 16, 2012. The CFTC is seeking the return of ill-gotten gains, restitution for defrauded participants, civil penalties, trading and registration bans, and permanent injunctions against further violations of commodities laws. Stroud reportedly confessed to participants that he had “lied” and that “there was no money” after the scheme collapsed.
The CFTC is collaborating with the U.S. Attorney’s Office for the Middle District of Alabama, the NFA, and the Alabama Securities Commission in this case.
Source: CFTC.gov
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