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Alternative Market Briefing

CFTC, SEC bring charges on two Ponzi schemes, off-exchange forex scheme

Thursday, September 20, 2012

Bailey McCann, Opalesque New York: The Commodities Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) filed complaints on two separate Ponzi schemes, operating in Missouri and Georgia. The CFTC filed a federal civil enforcement action in the U.S. District Court for the Eastern District of Missouri, Eastern Division, charging Grahame Rhodes of St. Louis, Missouri, with fraud in connection with operating a decade-long, multi-million dollar commodity pool Ponzi scheme. The SEC also announced charges against a private fund manager and his Atlanta-based investment advisory firm for defrauding investors in a purported "fund-of-funds" and then trying to hide trading losses by creating new private funds to make money to pay back the original fund investors.

According to the CFTC complaint, Rhodes operated a Ponzi scheme that specifically targeted his family and friends and fraudulently obtained at least $2.1 million from at least 12 individuals to trade commodity futures in a pooled investment account. Rhodes was never registered with the CFTC in anyway. Rhodes allegedly solicited prospective pool participants by pretending to be a successful, but cautious, trader who earned annual rates ranging between 20 and 50 percent trading E-mini S&P futures contracts. In reality, he consistently lost money and made fraudulent representations about his firm and his activities to keep the scheme alive.

The SEC is seeking an emergency court order to freeze t......................

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