Lee LaGorio, of Woodland Hills, California, along with Chase Commodities Corporation, Excel Obando, and Universal Financial Holding Corporation, were ordered to pay $4.2 million in restitution to defrauded customers following a settlement with the U.S. Commodity Futures Trading Commission (CFTC). The consent order, entered by the United States District Court for the Central District of California on February 10, 2006, resolves charges of sales solicitation fraud stemming from actions between August 2003 and August 2004.
The CFTC alleged that Chase Commodities’ sales force misrepresented the potential profitability of trading options on futures, promising customers, such as doubling their money, within short timeframes. These claims were based on publicly available information already reflected in market prices and Chase’s unsubstantiated past successes. Salespeople also falsely minimized the risks associated with commodity options trading, failing to disclose that the vast majority of customers – approximately 99 percent of the 359 actively trading accounts – incurred losses totaling over $4 million.
During the same period, Chase collected over $2 million in commissions and fees from these losing customers. The court found that Universal Financial Holding Corporation, acting as a futures commission merchant, guaranteed all obligations of Chase related to customer accounts. LaGorio and Obando were deemed liable for the actions of Chase’s sales force, and UFHC was liable based on its contractual agreement.
In addition to the $4.2 million restitution, LaGorio and Obando were each assessed a $120,000 civil monetary penalty. Chase, LaGorio, and Obando were permanently enjoined from engaging in sales solicitation fraud, violating the Commodity Exchange Act and CFTC regulations. Chase and LaGorio were banned permanently from trading on Commission-regulated markets, while Obando received a five-year ban. The CFTC acknowledged the assistance of the National Futures Association in the investigation.
Source: CFTC.gov
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