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Screenshot of a breaking news alert e-mail from Q2 2017
The Commodity Futures Trading Commission (CFTC) has announced the filing of a Complaint on October 2, 2017, in the U.S. District Court for the Central District of California.
The CFTC Complaint, filed under seal, charges Defendants Scott Allensworth (d/b/a Capital Growth Group Associates and Cobra Development Group LLP), of Newhall, California; his California company E-Slate, Inc. (d/b/a Cobra Development Group LLP); Robert J. Fusco, of Henderson, Nevada; and David Weddle, of Somerset, Kentucky, with fraudulent solicitation, providing fabricated statements to pool participants, and misappropriation in connection with investments in two separate commodity pools. The Complaint also charges Defendants with registration violations.
On October 3, 2017, U.S. District Court Judge Consuelo Marshall signed a Statutory Restraining Order freezing the assets of Allensworth, Fusco, and E-Slate and prohibiting the destruction of their books and records. The district court scheduled a hearing for October 17, 2017 on the CFTC’s motion seeking a preliminary injunction against Allensworth, Fusco, and E-Slate.
James McDonald, Director of the CFTC’s Division of Enforcement, stated:
This case is yet another example of personal and business relationships being exploited for fraudulent gain. Sadly, as is so often the case, fraudsters take advantage of these relationships, which are built on trust, to carry out their fraud. This case demonstrates the CFTC’s commitment to root out and prosecute such fraudsters.
According to the Complaint, since at least December 2013, and continuing to the present, Allensworth fraudulently solicited certain tax and retirement-planning clients to invest in two commodity pools. Because Allensworth himself did not trade commodity futures, he worked first with Fusco, and then with Weddle, who served as traders for the respective pools.
The Complaint alleges that, in connection with the DTG LLC pool, Allensworth and Fusco represented that Fusco was a successful futures trader when he was not. As alleged, Allensworth, E-Slate, and Fusco misappropriated all invested funds and issued false trading statements. They also allegedly concealed, and continue to conceal, their misappropriation of pool participant funds for personal use. Allensworth, working with Fusco, solicited 13 pool participants to contribute $246,500 to the DTG LLC pool, according to the Complaint.
The Complaint further alleges that, since at least November 2015, Allensworth began working with Weddle to solicit investments in the JustInfo LLC pool. The Complaint alleges that Allensworth and Weddle used fake trading statements and touted false trading profits — in some instances claiming profits in excess of 20% per month — to entice prospective and existing pool participants to invest in the JustInfo LLC pool. Weddle, however, never generated a positive monthly return trading commodity futures and, by March 2017, had lost all pool participant funds that had been placed in trading accounts, according to the Complaint.
Misappropriated Customer Funds
In addition, Allensworth and Weddle allegedly made Ponzi payments to multiple pool participants and misappropriated pool funds to pay for personal expenses, including vacations, golf country club dues, dining, spa treatments, and college tuition for Weddle’s children. Allensworth solicited 59 of his clients to participate in the JustInfo LLC pool, and, collectively, Allensworth and Weddle solicited approximately $2.9 million for investment in the JustInfo LLC pool, the Complaint alleges.
In its continuing 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 and CFTC Regulations, as charged.