CFTC fines and bans Georgia man over $900k for fraudulent trading pool

The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Consent Order imposing a permanent injunction against Defendants Hendrik A. Van Beuningen and his company, DeBrink Trading Fund I, LLC, and requiring them to pay a $430,000 civil monetary penalty and restitution of $480,000 to defrauded pool participants.

The Court’s Order against the Defendants finds that they violated anti-fraud provisions of the Commodity Exchange Act (CEA), misappropriated pool participants’ funds, and committed registration violations.  The Consent Order also imposes permanent trading and registration bans on the Defendants and prohibits them from further violations of the CEA and CFTC Regulations, as charged.

The Order, entered on August 1, 2016, by U.S. District Court Judge Timothy C. Batten, Sr. of the U.S. District Court for the Northern District of Georgia, arises from a CFTC enforcement action filed against the Defendants under seal on March 28, 2016.

The Order finds that, between February 2014 and January 2016, the Defendants solicited and received at least $505,000 from at least five pool participants for the purported purpose of trading FX, bond, oil, and gold futures contracts. Defendants failed to operate the pool as a legal entity separate from that of DeBrink, and participants’ funds were received in a DeBrink bank account, rather than in an account in the name of the pool. The Order further finds that the Defendants commingled pool funds with non-pool funds.

Misappropriation of Pool Participants’ Funds and Trading Losses

According to the Order, the Defendants either misappropriated or lost the pool funds, yet continued to represent that the pool’s trading was profitable. Of the $365,000 received from pool participants between February 2014 and May 2015, the Defendants transferred only $228,405 to a Futures Commission Merchant (FCM) account. The Order further finds that, as of September 30, 2015, the Defendants had lost nearly all of the funds transferred to the FCM through unprofitable trading, with only $7,632 of the original $228,405 remaining. Defendants received an additional $40,000 from a pool participant in November 2015 and $100,000 from another pool participant in January 2016; these funds were misappropriated and never transferred to a pool FCM trading account, the Order finds.

False Trading Results and Returns

However, in October 2015, the Defendants’ website falsely claimed the pool had a 19.41% return for 2014 and a 31.77% cumulative return through September 2015. In reality, the Defendants had experienced cumulative trading losses since the pool’s inception and provided false information about the pool’s trading results knowingly or with reckless disregard for the truth, according to the Order. Furthermore, as recently as March 2016, the Defendants falsely provided participants with online account statements that claimed the five pool participants were experiencing an average 37.47% return on their $505,000 combined investment, while fabricating FCM account statements to cover up their trading losses, per the Order.

To view the official release from the CFTC click here.

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