CFTC revokes Phy Capital Investments registrations as CPO and CTA
The United States Commodity Futures Trading Commission (CFTC) today announced it has revoked the Commodity Pool Operator and Commodity Trading Advisor registrations of Phy Capital Investments LLC and the Associated Person registration of its owner Fabio Bretas de Freitas.
The regulator launched revocation proceedings against Phy Capital and Bretas in May this year. CFTC Judgment Officer Kavita Kumar Puri issued an Initial Decision on Default on August 31, 2020, which was finalized on September 30, 2020. Puri found that Phy Capital and Bretas are subject to statutory disqualification from CFTC registration based on an order entered by the U.S. District Court for the Southern District of New York.
Let’s recall that this order was entered in October 2019. The judgment ordered the defendants to pay a civil monetary penalty of $12.6 million, as well as $4.62 million in restitution and prejudgment interest to Phy Capital clients. They were also ordered to disgorge $5.75 million in ill-gotten gains. Back then, the Court also permanently banned the defendants from trading in CFTC-regulated markets.
The order found that from at least March 2016 through May 2019, the defendants fraudulently solicited clients and prospective clients to trade commodity interests by claiming they had developed proprietary software called SoPhyA, which achieved profits of 49 percent on futures trading from February 2016 through November 2017 for one of their commodity pools. According to the order, however, only $155,000 of the $6,894,979 in client funds received by the defendants was ever put into any trading accounts. The balance was either misappropriated for non-trading uses or returned to other clients in a manner akin to a Ponzi scheme.
The court also found Bretas misrepresented to NFA that one of the defendants’ commodity pools was a private equity fund created to develop intellectual property sold to other businesses. Bretas was also found to have set up a fictitious email account to mislead NFA staff into believing they were communicating with a purported lender to the pool.
Today, the CFTC stressed that Judgment Officer Kavita Kumar Puri also found that Bretas is subject to disqualification from CFTC registration based on his conviction for conspiracy to commit commodities fraud and wire fraud in connection with the same activities.