The CFTC has accused Blue Sky Capital Management and principal Gregory M. Schneider of making false statements to the NFA. Blue Sky had dual registration as a Commodity Pool Operator (“CPO”) and a Commodity Trading Advisor (“CTA”) and Schneider was the corporation’s sole registered Associated Person (“AP”).
According to the complaint, Blue Sky and Schneider willfully concealed relevant facts and and/or made false or fraudulent statements to NFA auditors. During a routine audit in October 2008, Blue Sky told NFA regulators that the firm only managed 10 customer accounts with an aggregate equity of $20,000, that they had only managed accounts since March 2008, and that they had received no customer complaints. However, the CFTC alleges that Blue Sky failed to disclose that they managed 80 other accounts in 2007 with a aggregate equity of $1.2 million. The accounts suffered approximately 30% losses in invested equity. The CPO also failed to tell the NFA auditors that a customer had repeatedly filed complaints prior to and during the audit.
The NFA learned of the deception when the disgruntled customer contacted the agency. Regulators looked into the matter and discovered the complaining customer’s account was not among the ten listed in the audit. When the NFA confronted the CPO in January 2009, they made more fictitious or fraudulent statements about the 2007 accounts and the complaint.
Blue Sky settled with the NFA in 2009, and has permanently withdrawn its NFA membership. The NFA The CFTC is seeking permanent trading and registration bans and a civil monetary penalty.
Read more about this CFTC enforcement action.
photo credit: kevindooley