The CFTC has filed a complaint against Michael Justin Hoopes in connection with a commodity futures Ponzi scheme. The unregistered Commodity Pool Operator (“CPO”) allegedly engaged in solicitation fraud, and misappropriated over $11 million. A judge has frozen the defendant’s assets, and prohibited the destruction of his books and records.

The CFTC alleges that from September 2007 to the present Hoopes solicited funds to invest in commodity futures, primarily from Idaho residents. The unregistered CPO misrepresented the potential for profit and the risk of loss involved in commodities trading. He also told participants that his investment strategy minimized downside risk. The defendant claimed to earn annual returns over 25%, and that he had never lost money trading.

According to the complaint, it was in this manner that he was able to solicit over $2 million from at least 10 people to trade stock index futures in his commodity pool, Aspen Trading. Hoopes solicited a further $9.6 million, some of which was used to trade futures, and some of which was comingled with his personal funds.

Furthermore, to disguise the scheme the CPO allegedly sent false account statement to at least one pool participants showing Aspen Trading has a $2.2 million balance. Aspen Trading never had a trading account, and the CFTC says that Hoopes simply lost or misappropriated most of the funds he accepted. He spent at least $151,693 on personal expenses, like credit card, car, and loan payments. Hoopes also made Ponzi payments totaling $594,339.

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

Read more about this CFTC enforcement action.
photo credit: AMagill