The United States Commodity Futures Trading Commission (CFTC) is seeking nearly $5.8 million in restitution from fraudulent trading scheme Long Leaf.
This becomes clear from recent filings at the Illinois Northern District Court. The regulator has moved the Court for partial summary judgment against Long Leaf Trading Group, Inc, on all claims set forth in the complaint, including options fraud (Count I), commodity trading advisor (“CTA”) fraud (Count II), fraudulent advertising by a CTA or principal thereof (Count III), failure to register as a CTA (Count IV), failure to provide required disclosures for a trading program (Count V), and various failures by its associated persons (“APs”) to register in that capacity (Count VI).
The CFTC alleges that Long Leaf was a boiler room that skirted registration and regulatory requirements and cheated and defrauded substantially all of its clients over its approximately five-year existence. Long Leaf did not register as a CTA and it did not provide customers with the required disclosure document.
In addition to its registration and regulatory violations, Long Leaf defrauded its customers through a scheme that spanned the ownership of both Defendant Timothy Evans (2015–November 2017) and Donelson (December 2017–December 2019). The fraud generally took the form of misrepresentations about the company’s performance, the qualifications of its management, and omissions of track record information— all of which are items that courts have long held are material as a matter of law in this context.
Long Leaf’s misrepresentations and omissions were memorialized in pitch scripts and other solicitation materials that were used by Long Leaf’s broker staff as they sat each day cold-calling hundreds of potential customers.
Customers who participated in the trading program sustained losses totaling $5,767,145.This amount should be repaid to customers as restitution, the CFTC argues. Of the $5,767,145 lost by customers during the Relevant Period, $4,010,994 of that sum consisted of commissions charged by Long Leaf.These commissions constitute ill-gotten gains that must be disgorged by Long Leaf.
Accordingly, the CFTC requests that its motion for summary judgment against Long Leaf be granted, and that an order be issued finding Long Leaf liable for Counts I through VI of the CFTC’s complaint and ordering it to pay $5,767,145 in restitution and $4,010,994 in disgorgement, with an offset against disgorgement for all sums paid towards restitution.
Let’s note that the CFTC is set to seek a civil monetary penalty to be imposed on Long Leaf. The size of the fine is poised to be determined at a later date.
The regulator is also pushing for summary judgments against individuals associated with Long Leaf.