The US Commodity Futures Trading Commission obtained a $2.5 million penalty and judgment by default against Richard D. Carter and his company Blue Guru, LLC, for operating a commodity pool fraud.
The order requires defendants and the firm to pay a $1.76 million civil penalty and disgorge roughly $838,642 in ill-gotten gains. Additionally, it imposes permanent trading and registration bans against Richard and his company.
The agency originally charged Carter with helping Mark Slobodnik, a former member of the CME Exchange , in operating the Blue Guru fraudulent scheme over four years. The charges included making false representations about average monthly gains to solicit more than $1.76 million from nearly 80 people, supposedly to invest in a high-frequency commodity pool fund.
Carter allegedly told clients their investments would be traded through a Clearing House called Straits Financial and sent some of them fabricated statements showing that the firm held a balance of more than $6.1 million.
Blue Guru, a Lincolnshire-based firm that claimed to specialize in trading futures contracts, held only $9,000 in investor funds, the complaint states.
In addition, the defendants told existing and potential clients that the firm’s proprietary trading model was profitable, and they would earn eight percent per year on their investment plus 50 percent of any trading profits. In reality, Slobodnik had falsified the documents to conceal the fact that he misappropriated much of the money, and was also responsible for approximately $249,000 in trading losses.
The default judgment order follows a CFTC complaint filed in January 2018 that charged the defendants with fraud, misappropriation, and failing to register with the CFTC.
In a related pending case, the same judge ordered Carter, who worked as a trader at Blue Guru, to collectively pay nearly $7.0 million in restitution, disgorgement, and civil penalties.
