The US District Court for the Middle District of Tennessee on March 16 delivered a summary judgment order penalizing two Kentucky men, Rodney Phelps and Jason Castenir and their co-founded company, Maverick Asset Management LLC, over $5 million in monetary sanctions.
A press statement from the Commodity Futures Trading Commission (CFTC) said the order also included a permanent injunction and equitable relief against the parties. The new judgment follows the sentencing of Phelps to 108 months in federal prison in September 2019 after a jury convicted him of 13 counts of fraud and conspiracy in connection with the same underlying facts as the CFTC’s case, the Commission said.
Additionally, the court slammed permanent trading and registration bans and a permanent injunction from further violations of the Commodity Exchange Act (CEA) and CFTC regulations on the men, the agency added. The new summary judgment follows an earlier order of default judgment entered by the same court against Castenir and Maverick, the company.
A Breakdown of the Fines
The $5 million in fines include a $420,000 civil monetary penalty against Phelps and a $2,461,301 civil monetary penalty, jointly, against Castenir and Maverick. In addition, the orders require Maverick and Castenir to pay $1,172,800 in restitution and Phelps to pay $1,172,800 in restitution to defrauded customers.
“The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable,” CFTC wrote in the release.
Backstory
According to the statement, Phelps and Castenir in 2013 solicited more than $1.2 million in funds from investors through Maverick. The US court found that the solicitations were boosted by false materials claiming that Phelps had an extensive history of investing successfully in commodity trading markets.
The solicitations falsely assured investors that their risk would be ‘limited’, and that they could expect ‘guaranteed returns’ of more than 100% per year. Further, the court said Maverick promised investors that their money would be invested in commodity trading markets with the goal of earning substantial returns.
CFTC wrote: “According to the summary judgment order, Phelps and Castenir actually used less than $400,000 of the invested funds for trading. The remaining investor funds were misappropriated. Nearly all of the funds used for commodity trading were lost in unprofitable trades.
“Nevertheless, throughout 2013, and despite the losses, Phelps, Castenir and Maverick sent investors false account statements showing their investments yielded remarkably high gains. Throughout the entire investment operation, Phelps never registered with the CFTC as a commodity trader, despite the fact that Maverik engaged in numerous regulated activities.”
CFTC’s Watchdog Record
CFTC earlier this month filed a civil enforcement action against four operators for running a $44 million Bitcoin Ponzi scheme . The operators Dwayne Golden of Florida, Jatin Patel of India, Marquis Egerton of North Carolina and Gregory Aggesen of New York, were charged for misappropriating millions of dollars. Of the four, Golden, Patel and Egerton were accused of fraudulently soliciting more than $23 million worth of Bitcoins through the websites: Empowercoin and Ecoinplus.
Earlier in February, the American commodity trade watchdog burst another fraudulent trading scheme involved in binary options solicitation and trading fraud. The regulator issued an enforcement order against Golden Signals LLC and its owner Richard D. Neal for fraud and settled for $2.6 million. Golden Signals acted as a commodity trading advisor (CTA) and commodity pool operator (CPO), although it did not register as either of them. In addition, the company advertised its services across social media channels without making proper disclosure.
