Robert J. Cannone, Thomas B. Breen, and Francis Franco are facing charges of commodity futures fraud and registration violations following a complaint filed by the U.S. Commodity Futures Trading Commission (CFTC) on November 16, 2011. The case, filed in U.S. District Court for the Central District of California in Santa Ana, alleges the men fraudulently operated a $1.4 million commodity futures pool called National Equity Holdings, Inc. (NEH).
According to the CFTC, from May 2009 through May 2010, Cannone, Breen, and Franco solicited funds from at least 20 individuals to trade commodity futures contracts. However, only a portion of the $1.4 million collected was actually used for trading, resulting in losses of approximately $582,631. The majority of the funds were allegedly misappropriated to make monthly “returns” to investors, falsely presented as profits from successful trading.
The complaint further alleges that Cannone, Breen, and Franco used pool participant funds for personal expenses and concealed their trading losses by issuing falsified account statements. Despite initially claiming all funds were lost in trading and promising repayment, investors have not received their principal back.
National Equity Holdings, Inc. is also accused of failing to register with the CFTC as a commodity pool operator, and Cannone, Breen, and Franco failed to register as associated persons. The CFTC claims the defendants falsely represented themselves, claiming a successful trader (Franco) was managing the pool, misrepresented potential profits and risks, and failed to disclose their lack of registration and intended use of funds.
The CFTC is seeking the return of ill-gotten gains, restitution for defrauded customers, civil monetary penalties, and permanent injunctions against further violations of federal commodities laws. The Federal Bureau of Investigation (Orange County Office) and the U.S. Attorney’s Office for the Central District of California (Santa Ana Office) assisted in the investigation.
Source: CFTC.gov
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