Thomas C. Kennedy, of Tamarac, Florida, along with Executive Commodity Corp., Don D. Campbell of Parkland, Florida, and Alberto J. Jimenez of Coral Gables, Florida, have been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for commodity options fraud, according to a consent order finalized on February 21, 2008. The case, originating from a complaint filed June 20, 2006, alleges a systematic misrepresentation of facts and failure to disclose critical information to customers solicited to trade commodity options.
The CFTC obtained approximately $24 million in restitution and penalties. The orders require the defendants to pay roughly $17,760,000 in restitution to harmed investors and $6,150,000 in civil monetary penalties. Additionally, all defendants are permanently barred from engaging in any commodity-related business activities, including trading for others and soliciting investments in commodity futures and options.
The orders, entered by the Honorable William P. Dimitrouleas of the U.S. District Court for the Southern District of Florida, detail how Executive, and its sales staff – Campbell and Jimenez – fraudulently solicited public investors between January 2002 and November 2005. They allegedly exaggerated potential profits while minimizing the risks involved. Sales representatives, operating under the direct supervision of Kennedy, the president and manager of Executive, made specific claims such as a potential 30% profit in two days, or $80,000 in profits within a week to ten days.
The CFTC found that Executive failed to disclose to customers that the vast majority of accounts closed at a loss. From January 1, 2003, through December 2004, over 93% of the approximately 793 customers solicited by Executive lost money, with roughly two-thirds losing over 95% of their invested funds. Kennedy was held liable for failing to implement adequate supervisory systems to prevent these fraudulent statements by his employees.
“In this instance, the systematic lack of supervision cost innocent investors millions,” stated CFTC Director of Enforcement Gregory Mocek. “This settlement demonstrates that the CFTC will not only pursue those who actively defraud investors, but will hold accountable those who chose to remain stagnant when apprised of the misconduct.”
The case was pursued by CFTC staff members Todd Kelly, Peter Haas, Paul Hayeck, and Joan Manley.
Source: CFTC.gov
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