Chicago, IL – September 13, 2007 – A federal district court in Chicago has issued a preliminary injunction freezing the assets of Bermuda-based Lake Shore Asset Management Limited (LSAM) and its principal, Philip J. Baker, a London resident. The CFTC filed charges alleging a significant discrepancy between reported profits and actual trading losses.
The court found that LSAM, along with its affiliated companies Lake Shore Group of Companies Inc., Ltd. and Lake Shore Inc., operated as a common enterprise. Despite marketing materials claiming a successful trading record and $1 billion in assets under management, records revealed approximately $29 million in losses across known trading accounts managed by Lake Shore.
On August 28, 2007, the court issued the preliminary injunction, prohibiting LSAM from destroying documents and engaging in any commodity futures and options trading. The order came after a three-day hearing where LSAM contested the CFTC’s right to inspect customer and trading records. The Seventh Circuit Court of Appeals subsequently denied a request to stay the asset freeze pending appeal on September 7, 2007, ensuring the freeze remains in effect.
Some of the frozen assets are held by Sentinel Management Group, Inc., a futures commission merchant located in Northbrook, Illinois. However, Sentinel recently filed for Chapter 11 bankruptcy protection on August 17, 2007, adding complexity to the recovery of potentially defrauded funds.
The CFTC is pursuing permanent injunctive relief, record production, restitution for defrauded customers, repayment of ill-gotten gains, and civil monetary penalties against LSAM, the Lake Shore Group, and Philip J. Baker. The agency’s complaint, first amended on August 8, 2007, alleges violations of the Commodity Exchange Act.
The case is being prosecuted by Diane M. Romaniuk, Ava M. Gould, Mary E. Spear, Don Nash, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner of the CFTC’s Division of Enforcement.
Source: CFTC.gov
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