CPOs accused of fraudulent solicitation and misappropriation

The CFTC announced that it has charged Anthony Klatch, American Private Equity, and Klatch’s three Commodity Pool Operators (“CPOs”), ARM Capital Management, TASK Capital Management, and Vigilant Capital Management, with fraudulent solicitation and misappropriation of investor funds. The defendants’ assets have been frozen by court order, and destruction of books and records is prohibited.

According to the CFTC, Klatch began soliciting participants for his commodity pools in December 2007. He and his business partner, Tim Sullivan (now deceased), told participants that Klatch was able to achieve staggering returns, without disclosing that Klatch’s pool actually lost money. The defendants also gave presentations claiming the CPOs’ risk management strategy prevented the loss of more than a pre-determined percentage of participant’s investments. They even claimed that the commodity pool had been successful since 1997, during which year Klatch was actually still in middle school. Altogether, the defendants were able to raise $11.3 million from at least 62 individuals

The CFTC claims that commodity futures trading by the CPOs actually resulted in massive losses topping $8.6 million. Furthermore, the defendants took $2.5 million from the pool in fees and expenses. Subscription agreements with clients allegedly reveal that they were only entitled to $400,000, and that the remaining $2.1 million was misappropriated. Only $86,00o out of the initial $11.3 million was ever returned to participants.

The CFTC is seeking return of ill-gotten gains, restitution to defrauded customers, and civil monetary penalties.

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

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