The Commodity Futures Trading Commission (CFTC) announced the filing of a civil enforcement action on January 12, 2018, in the U.S. District Court for the Northern District of Illinois, charging Defendants Richard D. Carter of Mundelein, Illinois, Mark R. Slobodnik of Libertyville, Illinois, and their company Blue Guru Trading, LLC (Blue Guru), a Delaware limited liability company, with fraudulent solicitation, issuing false statements, and misappropriation in connection with investments in their Blue Guru commodity pool. The CFTC Complaint also charges the Defendants with registration violations.
Court Freezes Defendants’ Assets
On January 12, 2018, U.S. District Court Judge Manish S. Shah signed a Statutory Restraining Order freezing the assets of Carter, Slobodnik, and Blue Guru, and prohibiting the destruction of their books and records. The court has scheduled a hearing for January 26, 2018, on the CFTC’s motion seeking a preliminary injunction against the Defendants.
CFTC’s Director of Enforcement Comments
James McDonald, Director of the CFTC’s Division of Enforcement, stated:
The CFTC will move quickly to stop fraudsters in their tracks and to shut down ongoing fraudulent schemes. The Commission did exactly that here—shutting down an ongoing allegedly fraudulent scheme, freezing assets in an effort to make the victims whole, and protecting those who otherwise might have fallen prey to the allegedly fraudulent scheme.
According to the Complaint, since at least April 2014 and continuing to the present, the Defendants fraudulently solicited and accepted at least $750,000 from at least eighteen individuals for the purpose of trading commodity futures contracts in pooled investments. Carter and Slobodnik solicited relatives, friends, business associates, and others to invest in Blue Guru by various means, including in-person communication, word-of-mouth, and chat rooms, according to the Complaint.
Issuance of False Statements
As alleged, Carter and Slobodnik willfully or recklessly made misrepresentations of material fact to participants and prospective participants of Blue Guru concerning the profits they were making on their participation interests in the commodity pool. Among the alleged misrepresentations, Carter and Slobodnik told prospective and actual participants that Blue Guru would use their money to trade futures, including the Dow Jones E-mini and the S&P 500 E-mini contracts on the Chicago Mercantile Exchange (CME). Carter and Slobodnik also allegedly provided at least one prospective participant a track record showing that Blue Guru’s monthly returns ranged from 3% to more than 8% with no losses, and Carter and Slobodnik informed prospective participants that they were guaranteed to earn profits of at least 8% annual returns on their investment and receive 50% of gross net trading profits.
Carter allegedly issued false account statements to participants that misrepresented the profitability and value of participants’ respective interests in the pool when, in fact, the Defendants did not use a significant portion of participants’ monies for trading on behalf of the pool, and instead Carter and Slobodnik misappropriated a significant portion of participants’ funds. According to the Complaint, Blue Guru participants have been unable to withdraw funds from the pool, while Carter and Slobodnik have ignored participants’ demands, engaged in delay tactics, and made false statements to participants about conditions that purportedly prevented them from making disbursements.
The Complaint alleges that Carter is a former securities broker who was barred from acting as a broker in 2005, had his registration as a securities salesperson in Illinois revoked in 2006, and was permanently barred by the Securities and Exchange Commission (SEC) from serving as an officer or director of any entity registered or required to file reports with the SEC. According to the Complaint, Slobodnik is a former commodity broker and former member of the CME.
In its continuing civil litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act, as charged.
CFTC Division of Enforcement staff members responsible for this action are Susan Gradman, Joseph Patrick, Brigitte Weyls, Scott Williamson, and Rosemary Hollinger.