Kenneth L. Branch, of New Castle, Delaware, has been ordered to pay over $1.5 million in restitution and penalties for defrauding customers, according to a settlement announced by the U.S. Commodity Futures Trading Commission (CFTC) on May 20, 2009.
The CFTC filed an enforcement action in the U.S. District Court for Maryland on March 28, 2008, alleging that Branch, through his company Cocoon Trade, Inc., fraudulently solicited at least $1.4 million from 46 individuals. The funds were intended for investment in commodity futures, either through a commodity pool or individual trading accounts managed by Branch.
The Consent Order and Default Judgment require Branch and Cocoon Trade, Inc. to collectively pay $632,787 in restitution to the defrauded customers and $910,000 in civil penalties. The orders also permanently ban both Branch and the company from engaging in any commodity-related activities, including registering with the CFTC.
Investigators found that Branch misappropriated at least $941,897 of customer funds. These funds were allegedly used to pay purported profits to other pool participants, creating a Ponzi-like scheme, and to cover Branch’s personal expenses. The actions also constituted violations of registration and regulatory requirements related to the operation of the commodity futures pool and individual managed trading accounts.
The case was led by CFTC staff members Kevin S. Webb, Katherine S. Driscoll, Kara Mucha, Michelle Bougas, James H. Holl III, Gretchen L. Lowe, and Vincent McGonagle. The Maryland Attorney General’s Office provided cooperation during the investigation.
Source: CFTC.gov
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