Correction : CFTC Federal Court Orders Minnesota Man And Two Companies To Pay Over 2 Million For Futures Fraud And Misappropriation

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The order requires PDM to pay a $1.2 million civil monetary penalty and a $1.2 million fine to the SEC. PDM is also required to pay $1.1 million in restitution to victims of the scheme. The order imposes a permanent trading and registration ban against PDM.

The SEC’s Enforcement Action Against Miller, F2F, and PDM

The Securities and Exchange Commission (SEC) has taken significant enforcement action against three individuals and entities involved in a complex scheme to manipulate the price of a publicly traded company’s stock.

The Complaint and Investigation

The CFTC complaint, filed on February 22, 2023, marked the beginning of an investigation into PDM’s activities. The agency’s primary concern was the lack of transparency and disclosure provided to pool participants. This lack of transparency is a critical issue in the commodity trading industry, as it can lead to significant financial losses for investors.

Key Findings

  • The CFTC complaint alleged that PDM solicited and accepted $400,000 from nine individuals to participate in a commodity pool. PDM failed to provide pool participants with required disclosure documents, which is a serious breach of regulatory requirements. The complaint also alleged that PDM engaged in a pattern of conduct that was designed to deceive and mislead pool participants. ## The Regulatory Framework*

    • The Regulatory Framework

    The commodity trading industry is heavily regulated by the CFTC. The agency is responsible for ensuring that all participants in the industry comply with relevant laws and regulations. In this case, the CFTC complaint alleged that PDM failed to comply with these regulations.

    Regulatory Requirements

  • Disclosure documents are a critical component of the regulatory framework in the commodity trading industry. These documents provide pool participants with essential information about the risks and potential rewards of investing in a commodity pool. Failure to provide these documents is a serious breach of regulatory requirements and can result in significant penalties. ## The Impact on PDM*

    • The Impact on PDM

    The CFTC complaint and investigation have significant implications for PDM. The agency’s findings suggest that PDM engaged in a pattern of conduct that was designed to deceive and mislead pool participants.

    The order further finds Miller made material misrepresentations about his futures trading performance and having other assets under management, to persuade PDM to transfer funds to F2F for the purpose of trading futures contracts. In fact, Miller did not trade as successfully as he claimed and did not have millions under management. Moreover, Miller and F2F misappropriated some of PDM’s funds by failing to transfer all of PDM’s funds to Miller’s trading account and failing to transfer to PDM funds withdrawn from Miller’s trading account. Miller and F2F also illegally collected funds from the pooled investment vehicle in F2F’s or Miller’s bank and trading accounts, failed to provide a required disclosure document to PDM, and failed to maintain required records. The order finds that by soliciting funds from and engaging in discretionary trading on behalf of the pool established by PDM, F2F acted as a commodity trading advisor and Miller acted as an associated person of a CTA without being registered with the CFTC as required.

    Division of Enforcement staff responsible for this action are Dmitriy Vilenskiy, Julia Colarusso, Christine Ryall, and Paul G. Hayeck. RELATED LINKS

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