A federal court in the US state of Florida has slapped a total $1.6 million fine on two residents, Marvin W. Courson III and Christopher A. Kertatos, for running a Ponzi scheme in the retail commodities market.
Announced by the Commodity Futures Trading Commission (CFTC ) on Wednesday, the court order against the two individuals imposed permanent trading and registration bans, along with a permanent injunction prohibiting them from further violations.
The latest order came after the court entered an order of judgment against a company, The Alista Group, and individual Luis M. Pineda Palacios, in connection with the same fraudulent scheme. Alista and its promoters were first charged by the regulator in July 2020.
A Ponzi Scheme
Both Courson and Kertatos are Florida residents, which operated from July 2016 through to around January 2018. They defrauded customers intending to engage in illegal, off-exchange retail commodity transactions involving precious metals.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandates off-exchange leveraged transactions such as those conducted by the defendants are illegal unless they result in the actual delivery of metal within 28 days. But, the regulator found that precious metals were never delivered to the customers.
The court order detailed that both the individuals misappropriated the customer funds to speculate in precious metals for Alista’s own account. They even paid Alista’s business expenses and made Ponzi-styled payments to some customers. Courson controlled the bank accounts of Alista and was in charge of business operations and hiring decisions.
Kertatos was additionally accused of individually defrauding some of Alista’s customers. He received customers’ funds in individual and/or corporate bank accounts under his control and misappropriated the proceeds for personal and other expenses, which are unrelated to the trading of leveraged precious metals.
Out of the total monetary penalty imposed on both parties, Courson has been ordered to pay $560,152 as a civil monetary penalty, which is in addition to a separate same amount as customer restitution. Furthermore, Kertatos has been ordered to pay $274,988 as a civil penalty and another $274,988 as restitution.
