Tue, Sep 16, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Regulators & Courts: Suicide Reveals Long-Time Scheme.

Tuesday, March 24, 2009

REGULATORS & COURTS

Suicide Reveals Long-Time Scheme

Regulators continue to be unusually active in pursuing fraud complaints, some involving schemes that go back a number of years. In a pattern that resembles the Bernard Madoff case, the government is seeking the restitution of assets from the spouses of the accused in several instances.

In the past two weeks or so, the US Commodity Futures Trading Commission took the following futures-related actions.

A fraud emerged around February 25th when Bruce Kramer of Midland, North Carolina, committed suicide. The CFTC says Barki LLC and Mr. Kramer fraudulently solicited at least $40 million to trade leveraged foreign currency contracts and misappropriated at least $30 million of the funds to pay supposed profits or for personal expenses. Trade losses of at least $10 million were concealed for more than five years with false account statements. Only $575,000 remains in trading accounts and what happened to much of the money is unknown.

The personal expenses included the purchase of a horse farm for more than $1 million, a Maserati sports car and other luxury cars, artwork and extravagant parties. The government seeks to take the assets derived from the fraud from Mr. Kramer's wife Rhonda Kramer and from Forest Glenn, the horse farm owned by the Kramers.

The federal district court in Knoxville, Tennessee, froze the assets of Dennis Bolze and his Las Vegas-based company, Centurion Asset Management, after the CFTC filed a complaint charging them with fraudulently soliciting commodity pool participants, misappropriating funds and issuing false statements. The $20 million, six-year-old scheme hit at least 100 victims in the United States and Europe.

Potential clients were told that Mr. Bolze's trading generated annual profits of 15% to 20% and received false statements giving credibility to these claims. According to the CFTC, despite taking in more than $20 million, the defendants' actual commodity futures trading accounts never exceeded $250,000 in equity and the trading resulted in about $800,000 of losses. In addition, Mr. Bolze did not tell prospective customers that he pled guilty in 2001 to four counts of failing to file sales tax returns and failing to pay sales tax, resulting in a six-year prison sentence. That sentence was suspended and he was placed on probation and fined.

The CFTC charged John Donnelly of Charlottesville, Virginia, with operating a Ponzi scheme of more than $10 million involving three commodity futures pools. Mr. Donnelly allegedly operated three commodity pools for over seven years and solicited clients to invest in US Treasury Note futures and S&P 500 futures, but neither he nor his employees or the legal entities he created, Tower Analysis Inc., Nasco Tang Corp., and Nadia Capital Corp., really traded the pools' funds. The CFTC found that Mr. Donnelly executed only seven trades over the course of seven years.

Nevertheless the investors lost money because Mr. Donnelly misappropriated at least $1 million for himself and his wife and may have received another $1.7 million to which he was not entitled. The CFTC seeks to get money back not only from him but from Deborah Donnelly as well as two commodity pools, Blue Logic Operating Partners and Nadia Capital Operating Partners.

Ray White and CRW Management LP of Mansfield, Texas, were charged with operating a Ponzi scheme involving the solicitation of at least $10.9 million from more than 250 investors. Mr. White claimed to trade off-exchange forex contracts but the CFTC says he used investors' money to fund a drag racing team and purchase real estate, cars and Dallas Stars hockey season tickets. He told customers that CRW would generate between five and eight percent weekly returns, corresponding to an annual return of between 260% and 416%. Of the $10.9 million raised, at most only $94,000 was used to trade and most of that was lost.

The government seeks to take assets from Christopher White and Hurricane Motorsports because they allegedly received money as a result of the fraud.

The CFTC settled charges of failure to supervise the handling of customer accounts against Walsh Trading Inc., a Chicago-based introducing broker. The firm is required to pay $50,000 and strengthen its supervisory oversight of associated persons, employees, and agents. The regulator says Walsh failed to diligently supervise the handling of certain accounts managed by an unregistered commodity trading advisor and lacked procedures to detect unauthorized trading of these customer accounts. An associated person who managed Walsh's Arkansas branch office solicited customers, primarily from the farming community, for an unregistered CTA, opening at least five customer accounts. None of these accounts contained a power of attorney or a letter of direction authorizing trading. The unauthorized trading by the unregistered CTA continued undetected for two years.



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Big hedge funds show interest in Alibaba, Maglan joins other hedge funds in rush to Argentinian assets[more]

    Big hedge funds show interest in Alibaba From Hereisthecity.com: …Three other major hedge fund investors who have shown interest in the IPO are Dan Loeb of Third Point, David Tepper of Appaloosa Management and Dan Benton of Andor Capital Management. All three were among the roughly 800 p

  2. Investors looking at other sources for hedge fund-like returns[more]

    Komfie Manalo, Opalesque Asia: Investors who are always on the lookout for higher gains are looking at alternative sources of income, particularly exchange-traded fund industry that generates hedge fund-like returns, according to

  3. SEC charges Minnesota hedge fund manager with fraud[more]

    Bailey McCann, Opalesque New York: The SEC has brought charges against Minneapolis-based hedge fund manager, Steven R. Markusen for bilking investors out of fees and portfolio pumping. According to the complaint, the management fees earned by Archer Advisors LLC were shrinking due to the funds’ w

  4. …And Finally – Immature[more]

    From Newsoftheweird.com: Princeton University professor John Mulvey, 67 (who teaches financial engineering applications), was charged in July with stealing 21 yard signs around the town of Princeton -- signs for a computer repair business owned by a man with whom he was feuding. Nathan McCoy,

  5. Investors move capital out of Scotland ahead of referendum[more]

    Benedicte Gravrand, Opalesque Geneva: Ahead of Scotland’s independence referendum on September 18, asset managers, investors and pension savers are moving billions of pounds out of the country,