ENCINITAS, Calif. – Scott Bottolfson was sentenced to 60 months in jail and ordered to pay over $6.8 million in restitution following a joint investigation by the Commodity Futures Trading Commission (CFTC) and the U.S. Attorney’s Office for the Southern District of California. The sentencing, stemming from a case filed January 7, 2011, concludes a probe into a $14 million Ponzi scheme operated by Bottolfson through his companies, Spirit Investments, Inc. and Increase Investments, Inc.
Judge Anthony J. Battaglia of the U.S. District Court for the Southern District of California entered a consent order on October 19, 2011, imposing a permanent injunction, trading bans, and registration bans against Bottolfson, Spirit Investments, and Increase Investments. The order also requires the defendants to jointly and severally pay a civil monetary penalty of $6,813,462.51.
The CFTC alleged that from 2002 through 2010, Bottolfson solicited approximately $14 million from investors for commodity futures trading through the two investment pools. However, rather than investing the funds as promised, Bottolfson only deposited roughly $2.97 million into trading accounts. An estimated $11.03 million was diverted to his personal accounts, used for personal expenses, distributed as fabricated profit payments to earlier investors – a hallmark of Ponzi schemes – or otherwise misappropriated.
Of the funds actually placed in trading accounts, Bottolfson lost approximately $845,000. The investigation revealed a systematic misappropriation of investor funds and a fraudulent scheme designed to enrich Bottolfson at the expense of his clients. Bottolfson was previously found guilty of wire fraud in a related criminal case (US v. Scott Bottolfson, No.10CR4734 JM) on February 11, 2011.
The CFTC acknowledged the assistance of the National Futures Association and the Federal Bureau of Investigation in bringing the case to a successful resolution. The case was led by CFTC staff members Jason Mahoney, George Malas, Paul G. Hayeck, and Joan Manley.
Source: CFTC.gov
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