CTA charged with solicitation fraud, misrepresentation

The CFTC has brought charges against Commodity Trading Advisor (“CTA”) Paron Capital Management and the firm’s principal James D. Crombie for alleged false statements made to the NFA during an audit and for fraudulent solicitation.

According to the CFTC brief, between August 2010 and March 2011 the defendants used various promotional materials, including a PowerPoint Presentation called the “Flip-Book”, a monthly newsletter, and a Due Diligence Questionnaire to solicit clients to invest with the CTA. These materials significantly misrepresented Crombie’s trading expertise and performance history. Crombie and Paron falsified Crombie’s trading history and the firm’s total assets, among other things.

In March 2011, the NFA received  anonymous complaints accusing the defendants of using fictitious performance data and alerting the Association to past lawsuits against Crombie when he worked for another trading firm. Accordingly, the NFA commenced an investigation. When shown the promotional materials in use at Paron, auditors requested evidence verifying the historical returns cited by Crombie. Allegedly, Crombie provided the NFA with false statements, which the NFA discovered when they asked the entities in question to provide copies of the same statements. Crombie also denied the existence of any lawsuits against him, another false statement.

The NFA brought a Member Responsibility Action (MRA) and an Associated Responsibility Action (ARA) against Crombie and the CTA. However, the charges were settled out of court, and Crombie neither confirmed nor denied the allegations. The CFTC is seeking return of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, and trading and registration bans. No figure is placed on how much money the defendants actually fraudulently solicited.

Read more about this CFTC enforcement action.

Read our ongoing coverage of the Crombie/Paron case.
Creative Commons License photo credit: redjar

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