An action brought by the United States Commodity Futures Trading Commission (CFTC) against a long-running Ponzi scheme has come to an end.
The regulator today announced that the U.S. District Court for the District of New Mexico entered a consent order for permanent injunction, monetary sanctions, and equitable relief against Douglas Lien. The court imposed more than $10.3 million in monetary sanctions and relief for defendant’s wrongdoing, including his misappropriation of client money intended for futures trading.
The defendant has admitted to misappropriating the funds and issuing false account statements to conceal his fraud for nearly 20 years.
The order directs Lien to pay restitution of $5,195,679 and a civil penalty of $5,195,679, and imposes permanent trading and registration bans. The judgment resolves a CFTC enforcement case filed on December 9, 2019.
From at least August 2000 until December 9, 2019, Lien solicited more than $14.2 million from 45 individuals to manage their trading in commodity futures, specifically U.S. Treasury Bond futures. However, he did not invest the client funds, but instead operated a classic Ponzi scheme, using the money to pay other clients. He also kept more than $3.5 million for so-called “management fees” he billed clients based on false trading profits.
In addition, Lien gave his clients inaccurate account statements, including erroneous annual IRS Form 1099s that reported millions in fake profits. The order also states Lien failed to register as a futures commission merchant (FCM) to legally solicit and accept money from commodity futures clients for futures trades.
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.