Dana Point, California resident Jonathan Hansen and his company, Newport Private Capital LLC (NPC), have been charged with fraudulent practices by the Commodity Futures Trading Commission (CFTC), according to an order filed December 21, 2018. The charges stem from a “cherry-picking” scheme designed to benefit Hansen and NPC at the expense of their customers.
The CFTC found that Hansen and NPC disproportionately allocated profitable trades to accounts held in the name of Hansen’s spouse, while assigning losing trades to customer accounts. This occurred between September 2013 and January 2014, following an order from the National Futures Association (NFA) that prohibited Hansen and NPC from soliciting funds or withdrawing money from managed accounts without approval, and ultimately banned them from trading due to non-compliance.
Specifically, the investigation revealed that Hansen and NPC used bunched orders – entering orders without specifying account allocation – and then waited to see if the trades were profitable before assigning them. This allowed them to minimize risk in the spouse’s accounts and divert profits. Funds were then transferred from these accounts to joint accounts owned by Hansen and his spouse, concealing the activity from the NFA.
The CFTC also determined that Hansen and NPC failed to maintain adequate records to demonstrate a fair and equitable allocation methodology, violating CFTC regulations. The NFA assisted the CFTC in the investigation.
As a result of the settlement, Hansen and NPC will jointly pay a $315,000 civil monetary penalty. They are also permanently banned from engaging in any transactions involving commodity interests and are prohibited from registering with the CFTC in the future. The order requires them to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations.
Source: CFTC.gov
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