The CFTC has charged Oscar Hernandez and his companies Midway Trading Company and Conquest Investment Group with operating a commodity pool Ponzi scheme. The defendants did business as unregistered Commodity Pool Operators (“CPO”) and allegedly misappropriated $3 million from participants’ funds.
According to the CFTC, between 2006 and 2009, Hernandez told friends and acquaintances that he had developed a successful futures day-trading program, and that his investments in commodities and overseas stock markets were returning 180 percent annually, risk-free. He failed to ever disclose the risks associated with commodity futures trading, and exaggerated the potential for profit. In this manner, he was able to solicit more than $3 million from various individuals.
Allegedly, when the CPOs placed the participants’ funds in commodity futures trading accounts, they lost $1.3 million. The defendants also misappropriated another $1.8 million for personal use, to make car, mortgage, and credit card payments. To perpetuate the scheme, funds were also misappropriated to make Ponzi payments to participants expecting profits.
The enforcement action is a joint effort between the CFTC, the U.S. Attorney’s Office, and the FBI. The USAO has filed criminal charges against Hernandez as well. The CFTC is seeking restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, civil monetary penalties, and permanent injunctions against further violations of federal commodities laws from the CPOs.