CTA charged after trading strategy failure

The CFTC has filed an enforcement action against Gary and Bradley A. Futch and their firm, registered Commodity Trading Advisor (“CTA”) Tradewind Investments, LLC. The father-son duo and the CTA stand accused of defrauding commodities investors of over $5 million.

According to the complaint, between 2007 and October 2008, the defendants solicited the public to trade commodity option spreads. They told prospective clients–primarily family, friends, and acquaintances of the Futches–that investing in with the CTA was low risk. Specifically, the defendants told clients that Tradewind would never leave their option spreads “naked” (without protective positions), that no more than 25% of a customer’s funds would be at risk in any particular trade, and that Tradewind protected clients from margin calls. The CFTC claims that these statements were intended to mislead potential clients about the risks inherent in the options market. In this manner, the defendants were able to solicit approximately $5.6 million from 25 individuals.

Despite their promises, the CFTC alleges that the CTA’s trading strategy fell apart during a volatile trading session on October 10, 2008. Tradewind’s clients lost their entire investments and were subject to additional margin calls. In total, losses topped $5.6 million. The firm collapsed, and the both Futches filed for bankruptcy.

The CFTC is seeking disgorgement of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of federal commodities law.

Read more about this CFTC enforcement action.

Creative Commons License photo credit: Anil Jadhav

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