CFTC $1 Million Penalty

FINRA does not issue fines to balance its budget
March 28, 2019
“Not-so” Sweetwater Investments
April 10, 2019

Commodities fraudster pays $1 million in fines

Ten months of fraudulently soliciting and accepting $1,278,00 from seven customers with an eye towards trading commodity futures on their behalf will cost New Hope, PA’s William H. Powderly, IV more than $1 million in fines. And where did investors’ trading money go? Into an account in Powderly’s name. So, clawing back that money for harmed investors will be tough.

When a commodity trading strategy sounds too good to be true…It likely is.

From approximately January 2016 through October 2016, the US Commodity Futures Trading Commission (CFTC) alleged that Powderly solicited customers and prospective customers by claiming that he and a university professor had developed a commodity futures trading program that generated exceptional hypothetical training results. Moreover, Powderly added, “beta” testing of this system had generated consistent gains without a single day of loss.

Are you surprised, as a reader of this blog that the opposite was true?

In fact, the actual commodity trading that Powderly conducted during that period was consistently unprofitable. His account sustained losses every month, eventually reaching more than $1 million. To cover his tracks, the CFTC reports that Powderly created false account statements for his trading account and shared them with customers to conceal his trading losses.

Restitution pursued by the CFTC and the Courts

Just last month, Federal Court Judge Marvin Aspen of the Northern District of Illinois ordered Powderly, to pay a civil monetary penalty of $1,083, 138 requested by the CFTC. Powderly is also permanently sanctioned and banned from the industry.

The Judge’s Consent Order requires Powderly to pay $1,069,300 in restitution to defrauded customers and imposes permanent trading and registration bans. Of course, ordering restitution is one thing. Collecting the funds is always another.

Where were compliance and oversight?

Nowhere to be found in this specific, New Hope, PA instance. Red flags abounded, but no one saw the approaching train wreck. That’s where Patrina can help. We’ve built our business based on helping organizations keep track of “bad apples,” and stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective, designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.

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