Cleveland, OH – July 13, 2006 – John Glase, president of Carnegie Trading Group, Ltd., Inc., was found liable for fraud by the U.S. District Court for the Northern District of Ohio, following a non-jury trial in June 2005. Judge Donald C. Nugent issued a final judgment against Glase and his company on June 27, 2006, stemming from a CFTC complaint filed on July 23, 2004.
The case centered around the fraudulent solicitations and trading recommendations made by Carnegie Trading employees John Hollenbaugh and Reid Henshaw, who worked at the company’s Canal Fulton, Ohio branch. Judge Nugent found that Hollenbaugh and Henshaw misrepresented potential profits and downplayed the risks of options trading, falsely claiming customers could earn 150 to 200 percent profit in a short period with no risk. They also failed to disclose that the vast majority – 74 to 94 percent – of Carnegie Trading’s customers lost money year after year.
The court determined that these actions constituted fraud, and because Hollenbaugh and Henshaw acted within the scope of their employment, Carnegie Trading was also held liable. Glase, as president, was found to have exercised general control over the company but failed to implement adequate controls to prevent or detect these violations at the Canal Fulton branch.
As a result of the judgment, Carnegie Trading and Glase are ordered to pay $229,971.31 in restitution to nine customers who testified during the trial. They must also disgorge $32,850 in ill-gotten gains earned in 2002 and 2003, and pay a civil monetary penalty of $98,550. Hollenbaugh and Henshaw previously settled with the CFTC and are also subject to permanent injunctions barring them from future commodity trading and are jointly liable for restitution.
The judgment underscores the CFTC’s commitment to protecting commodity options customers from fraudulent solicitations and misleading trading advice.
Source: CFTC.gov
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