Nevada Federal Court orders commodity futures software vendor to pay more than $674,000 for fraud
Guess it’s not that hard to be a commodity futures software entrepreneur…especially when you buy a commodity futures trading package off the shelf and market it as your own.
That’s what Mirko Schacke (a.k.a. “Mick”) did. In 2013, the Antioch, CA resident bought commodity futures trading software package off of the shelf, white labeled the product and called it his own TradeMasters trading software. He began marketing the TradeMasters product to the public through a website he developed, www.trademastersusa.com, which remained active until mid-September 2016. Schacke also used various social media devices such as YouTube and Facebook to market the TradeMasters software.
Can you white-label someone else’s product without permission?
Of course not. Nonetheless, Schacke sold his TradeMasters trading software via a “software license” at a cost of between $1500 to $20,000 and then charged customers a recurring “monthly access fee” of $250 to $1,000 for “system setup,” “training activities and updates,” and ongoing personal trading support. In total, he collected $168,626 for licenses and monthly fees from 39 customers.
Over the next three years, Schacke also maintained several personal trading accounts at futures commission merchants (“FCMs”) registered with the Commission and periodically used his TradeMasters software to trade unsuccessfully for his personal accounts. In 2013, Schacke’ s personal accounts returned a negative 23.77%, a negative 19.00% rate of return for 2014, a positive 266.47% rate of return for 2015 (lucky!) and then back to a negative 24.87% rate of return through March 2016. Overall, the accounts had a net profit of $8,121.51 on a net investment of approximately $43,000 from July 2013 through March 2016.
If it sounds too good to be true, is it?
In this case, yes.
Regardless of actual returns, Schacke published performance results on the TradeMasters website claiming large profits. He claimed:
There’s more, but the bottom line is that Schacke got caught…finally. The Commodity Futures Trading Commission (CFTC) reported that the Honorable Gloria M. Navarro of the U.S. District Court for the District of Nevada (Las Vegas) entered an Order of Summary Judgment against Schacke and a Default Judgment against Schacke’ s company, TradeMasters USA, LLC.
The Order found that the Defendants committed fraud in their solicitations of futures trading software customers, failed to register with the CFTC and failed to provide required disclosures to investors. The Court’s Order also requires Schacke and TradeMasters to pay disgorgement of $168,626 to defrauded customers and a $505,878 civil monetary penalty. Schacke and TradeMasters are banned from trading or registering to trade.
Does fraud still pay?
Not if you get caught. Who among us is willing to bet against the regulators or has hundreds of millions of dollars to spare. Is it worth it the exposure, fines, and worse? That’s a question only you can answer. But that’s also where Patrina can help. We’ve built a business on helping organizations 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 and 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.