CFTC Charges Trader with Fraud in Ponzi-Style Commodity Pool Scheme

The US Commodity Futures Trading Commission (CFTC) has filed an anti-fraud enforcement action in an Arizona court, charging Derek Springfield and his company, Draven, with engaging in fraudulent sales practices, providing false account statements to commodity pool participants and misappropriating pool participants’ funds.

Today's announcement comes just one day after the watchdog imposed an $800K fine on David Zier and his company, ZAM, in yet another fraudulent commodity pool activity scheme.

To unlock the Asian market, register now to the iFX EXPO in Hong Kong

In its latest case, the CFTC alleged that from at least July 2014 until the present, Springfield and Draven fraudulently solicited and received around $1.46 million from at least 86 individuals in connection with pooled investments in commodity futures and Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term transactions.

Not Registered

Neither Draven or Springfield himself were registered with the CFTC as a Commodity Pool Operator (CPO) or as an associated person of a CPO.

According to the CFTC, Springfield solicited potential pool participants to invest with Draven by telling them that their funds would be placed in segregated accounts and traded on their behalf by “institutional quality traders with extensive experience generating returns on the Futures, Forex and Options markets.”

In reality, however, Springfield misappropriated some of pool participants’ funds to pay for Draven’s corporate expenses and his own personal expenses and never traded pool participants’ funds in the manner advertised.

Instead, he pooled together the funds received from pool participants into two separate commodity pools and traded only a small percentage of the funds deposited in the pools.

It was further alleged that what trading was done on behalf of pool participants, was executed by Springfield through one or more trading accounts maintained in his name at various registered futures commission merchants and retail foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term dealers.

Losses

However, Springfield allegedly was not a successful trader and incurred substantial losses in the trading accounts that he traded on behalf of pool participants.

To cover up these losses and the misappropriation of pool participants’ funds, he allegedly fabricated and issued false statements to pool participants, which purported to show profitable trading results on their behalf.

In addtion, to further perpetuate their fraud, he operated a Ponzi-style scheme that used pool participants’ funds to pay returns to other pool participants who requested withdrawals from their accounts.

The CFTC is seeking restitution to defrauded clients, repayment of fraudlent gains, penalties, permanent registration and trading bans and a permanent injunction against future violations of federal commodities laws and regulations.