US court issues $5 million penalty over commodity futures pool fraud

The Commodity Futures Trading Commission (CFTC) has revealed that the US District Court has entered summary judgment order on 16 March 2022 for monetary sanctions and permanent injunction against Rodney Scott Phelps Jason Castenir and their co-founded company, Maverick Asset Management LLC.

The US District Court for the Middle District of Tennessee’s judgement imposes a civil monetary penalties and restitution of over $5 million to be paid by the defendants. This includes a $420,000 civil monetary penalty against Phelps and a $2.5 million civil monetary penalty, jointly, against Castenir and Maverick. In addition, Maverick and Castenir are required to pay $1.2 million and Phelps $1.2 million in restitution to defrauded customers.

The court order also places permanent trading and registration bans on the defendants and a permanent injunction from further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

Additionally, Phelps was convicted in a criminal case of 13 counts of fraud and conspiracy in connection to the same actions and was sentenced to 108 months in prison.

CFTC fine

According to the court files, Phelps and Castenir formed Maverick, which operated commodity trading pool. In 2013 the company solicited over $1.2 million in funds from investors. The defendants used false materials claiming that Phelps had an extensive history of investing successfully in commodity trading markets.

The defendants also falsely assured investors that there would be a “limited” risk and that they could expect “guaranteed returns” of over 100% per year. Phelps and Castenir promised investors that their money would be invested in commodity trading markets, aiming to earn substantial returns.

The court found that in reality, the defendants used less than $400,000 of the funds for trading. The remaining money were misappropriated and almost all of the investments in commodity trading were lost in unprofitable trades. However, throughout 2013 Phelps, Castenir, and Maverick sent investors false account statements showing remarkably high gains.

During this whole investment operation, Phelps never registered with the CFTC as a commodity trader.

Earlier in February, the CFTC filed charges for fraud and misappropriation of over $19 million involving futures, forex and options.

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