Washington, D.C. – John M. Marshall and Stephen Z. Adams have been ordered to pay over $15.8 million in penalties for defrauding investors in a commodity pool scheme, the Commodity Futures Trading Commission (CFTC) announced today. The federal court consent order, entered on March 9, 2011, requires Marshall, Adams, and related entities to jointly pay $6,347,354.05 in disgorgement and a $9,521,031.08 civil monetary penalty.
The case, originating from a complaint filed February 19, 2009, alleges that the defendants misappropriated over $4.6 million from investors through a Ponzi scheme and subsequently destroyed records to conceal their actions. Brookshire Raw Materials Management, LLC (BRM), a CFTC-registered commodity pool operator and trading advisor, along with its principals Marshall and Adams, and Canadian companies Brookshire Raw Materials Group, Inc. (BRMG) and Brookshire and Company, Ltd. (BCL) were all implicated in the fraud.
According to court findings, from January 1, 2006, through December 30, 2008, the defendants solicited funds from approximately 13 pool participants for the purpose of trading commodity futures. However, they allegedly withdrew more than $4 million and used the funds for expenses unrelated to the pool’s operation, sending misleading account statements to investors to cover their tracks. The defendants also failed to produce required records when requested.
The consent order permanently bans Marshall, Adams, BRM, BRMG, and BCL from engaging in any commodity-related activity or registering with the CFTC. Additionally, the CFTC revoked BRM’s registrations as a commodity pool operator and commodity trading advisor in a separate action filed today.
Beyond the CFTC’s civil enforcement, Marshall and Adams faced separate criminal charges. In August 2010, both were indicted on federal wire fraud charges (USA v. Marshall and Adams, Criminal No.1:10-cr-0663 (N.D. Ill.)). Both men pleaded guilty to one count of wire fraud in December 2010 and January 2011, respectively. The wire fraud charge carries a potential sentence of up to 20 years imprisonment and a maximum fine of $250,000. They are currently awaiting sentencing.
The CFTC acknowledged the assistance of the Ontario Securities Commission and the U.S. Attorney’s Office for the Northern District of Illinois in this case. The case was brought forth on March 16, 2011.
Source: CFTC.gov
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