CPO Integra Capital fined for forex fraud

The CFTC has obtained a federal court order requiring Rodney Whitney, Nicholas T. Cox, and Integra Capital Management to pay over $6.9 million in restitution, disgorgement, and civil monetary penalties. The unregistered Commodity Pool Operator (“CPO”) and its two APs were found by a U.S. District Judge to have defrauded investors through a commodity pool Ponzi scheme involving commodity futures and over-the-counter foreign exchange (“forex”) transactions.

According to original CFTC complaint, filed in September 2010, from September 2006 to August 2009 Whitney, Cox, and Integra Capital solicited funds from the public, purportedly to invest in a commodity pool or trade off-exchange forex contracts. Whitney and Cox told potential investors that the CPO regularly earned 3-5% monthly returns and had only ever sustained minimal losses in its futures and forex trading. Whitney even distributed false account statements and tax forms to prove to investors that Integra Capital was profitable. In this manner, the defendants were able to solicit $3 million from 16 customers to invest in a commodity pool and from five others to trade off-exchange forex contracts.

The complaint alleges that some of the money that the defendants accepted was used in trading. However, contrary to the information in their solicitation materials, the defendants’ trading accounts consistently lost money. Furthermore, the remainder of the funds were misappropriated by Whitney and Cox to pay personal expenses, including travel, entertainment, and real estate purchases.

Cox has reached a settlement with the Commission, while Whitney and Integra Capital have been issued an order of default judgement.  Whitney and Integra must jointly and severally to pay restitution of $2,185,063, disgorgement of $1,198,316, and a civil monetary penalty of $3,594,948 , while Cox is required to pay restitution of $2,185,063 and a $2,185,063 civil monetary penalty. Furthermore, both orders permanently prohibit Whitney, Cox, and the CPO from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.

Read more about this CFTC enforcement action.
Creative Commons License photo credit: Jeff Belmonte

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