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From Securities Regulation Daily, October 3, 2018

CFTC is ready to take cases to trial

By R. Jason Howard, J.D.

In connection with allegations brought by the CFTC, the United States District Court for the District of Colorado has entered a final judgment against a Colorado-based defendant for fraudulent solicitation of customers in connection with the offering of a futures trading system and an advisory service, making false statements to the CFTC, and violations of a prior CFTC order (CFTC v. Gramalegui, September 26, 2018, Blackburn, R.).

Scheme. The CFTC’s allegations led the court to find that the defendant "engaged in a years-long scheme to fraudulently market and sell a futures trading system that did not work and an advisory service that did not deliver as promised." The court also found that the defendant failed to provide required advertising disclosures to clients and prospective clients and that he had violated a previous 2001 CFTC order based on his marketing of a previous deceptive trading system and advisory service.

False statements. In 2010, the Commodity Exchange Act (CEA) was amended to include a statutory provision on making false statements to the CFTC. This is the first litigated decision under that provision and the court found that during the CFTC’s investigation, the defendant repeatedly made false statements to the CFTC. The court cited six examples where either the defendant—or his counsel on his behalf—made false statements to the CFTC.

Enforcement. In a notable statement on the CFTC’s readiness to take cases to trial, James McDonald, CFTC director of Enforcement, commented: "The CFTC’s case and this court’s decision make clear that recidivists will be caught and punished and that lying to the CFTC is a grave offense meriting a serious penalty. This case also shows, yet again, the CFTC’s readiness to prove its case at trial."

Penalties. The court ordered the defendant to pay over $1,440,000 as a civil monetary penalty and to disgorge over $480,000 in ill-gotten gains. The court also imposed permanent trading and registration bans on the defendant and permanently enjoined him from further violations of the CEA and CFTC Regulations.

The case is No. 15-cv-02313-REB-GPG.

Attorneys: Daniel Church Jordan for the CFTC. Martin Melville Berliner (Berliner McDonald, PC) for Gregory L. Gramalegui.

Companies: U.S. Commodity Futures Trading Commission

MainStory: TopStory CFTCNews CommodityFutures Enforcement ExchangesMarketRegulation FraudManipulation InvestorEducation ColoradoNews

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