Washington D.C. – The Commodity Futures Trading Commission (CFTC) has filed charges against Kenneth Newcombe of California, former CEO and majority shareholder of a carbon credit project developer, alleging fraud related to the voluntary carbon credit market. This marks the CFTC’s first enforcement action targeting fraud in this emerging market.
The complaint, filed in the U.S. District Court for the Southern District of New York, alleges that from at least 2019 through December 2023, Newcombe orchestrated a scheme to falsely inflate the quality of his company’s emissions-reduction projects. He is accused of reporting inaccurate information to carbon credit registries and third-party reviewers to obtain carbon credits beyond legitimate amounts, then selling those credits for profit.
The CFTC also issued orders against CQC Impact Investors LLC (CQC), based in Washington, D.C., and Jason Steele, CQC’s former chief operating officer, settling charges related to the same fraudulent scheme. The orders detail how CQC engaged in deceptive practices involving projects designed to reduce carbon emissions through initiatives like installing efficient cookstoves and LED light bulbs in regions including sub-Saharan Africa, Asia, and Central America.
According to the CFTC, CQC fraudulently reported false and misleading information regarding the verification and issuance of carbon credits, resulting in the company receiving millions of credits it wasn’t entitled to. The fraudulent conduct allegedly involved multiple former executives, supervisors, and operations personnel within CQC.
The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, restitution, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) from Newcombe. While details of the settlement with CQC and Steele weren’t immediately available, the CFTC noted a reduction in potential penalties for CQC due to their cooperation with the investigation.
“Today’s actions show strong enforcement is another critical step in ensuring the integrity of these markets,” stated CFTC Chairman Rostin Behnam. Director of Enforcement Ian McGinley added that the case demonstrates the CFTC’s commitment to fighting fraud in both established and emerging markets like carbon credits.
Source: CFTC.gov
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