LeapRate Fraud Watch: ETF fund operator blew client funds on flamboyant lifestyle


CFTC issues $2.1 million financial penalty to Mitchell Huffman of Charlotte, NC, in addition to criminal sentencing two years prior

The U.S. Commodity Futures Trading Commission (CFTC) announced yesterday that it has obtained a federal court supplemental Consent Order requiring CFTC Defendant Mitchell Brian Huffman, of Charlotte, North Carolina, to pay a $2.1 million civil monetary penalty for operating a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts.

In an separate order as part of Mr. Huffman’s criminal sentencing in 2012, the perpetrator of this scheme was ordered to pay $3.2 million in restitution to defrauded customers (see United States v. Mitchell Brian Huffman, Case Number 3:1-cr-00246 RJC filed in the U.S. District Court for the Western District of North Carolina).

The supplemental order was entered on March 20, 2014, by Judge Graham Mullen of the U.S. District Court for the Western District of North Carolina and follows a Consent Order of permanent injunction entered on May 10, 2012, by Judge Mullen.

The Consent Order finds that Mr. Huffman operated a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts. In agreeing to the entry of the Consent Order, Huffman admitted to the factual and legal allegations contained in the CFTC’s Complaint, and the findings of fact and conclusions of law in the Consent Order. The Consent Order also imposes permanent trading and registration bans against Huffman, prohibits him from violating federal commodities law, as charged, and requires him to pay restitution and a civil monetary penalty as provided for in the supplemental Order.

According to the CFTC’s Complaint, from at least August 2006 to March 11, 2011, Mr. Huffman solicited prospective and actual pool participants, mainly family and friends, via in-person and direct telephone solicitations, to allow him to buy and sell exchange-traded commodity futures contracts on their behalf. During the period, Mr. Huffman accepted at least $3.2 million from approximately 30 participants throughout the United States.

As part of the plot which Mr. Huffman employed, he entered into “sponsorship agreements” with pool participants wherein Mr. Huffman represented that he would pool participants’ funds to trade commodity futures contracts on their behalf. Yet again, this represents another instance of luring investors by implying that they will make tremendous gains, as Mr. Huffman pitched to participants that he utilized a “proprietary trading program” that generated “profits” of 100 percent to 150 percent per year. Mr. Huffman claimed to retain 20 percent of all profits purportedly made from the “proprietary trading program.”

In common with the vast majority of such promises of extremely high gain, all of these representations by Mr. Huffman were false, according to the Consent Order. Unknown to participants, Mr. Huffman misappropriated participants’ funds for a variety of personal uses, including but not limited to purchasing multiple motor vehicles for his personal use, including two Land Rovers and a Smart Car, as well as at least $71,255 for purchases related to Huffman’s classic car collection.

In addition to an expensive penchant toward luxury and classic motor vehicles, he also squandered approximately $188,583 of investors’ funds on personal travel and luxury vacations, including Disney cruises and first-class airfare to Hawaii and Las Vegas, Nevada.

Proving that charity does not always begin at home, Mr. Huffman also made approximately $51,540 in charitable contributions in his own name. The trip to Hawaii was a 25th wedding anniversary celebration for Mr. Huffman, upon which he brought along several pool participants with him, purportedly at his own expense, according to the Consent Order. These participants were completely unaware that their funds were being used by Mr. Huffman to pay for the luxury vacation. When Mr. Huffman could no longer sustain his fraudulent scheme, he admitted to special agents of the Charlotte, North Carolina office of the Federal Bureau of Investigation the fraudulent scheme described above and his participation therein, according to the CFTC’s order.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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LeapRate Fraud Watch: ETF fund operator blew client funds on flamboyant lifestyle

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