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From Securities Regulation Daily, June 21, 2013

Commodity Pool Operator Consents to Injunction and Penalties in Commodity and ForEx Schemes

By Rodney F. Tonkovic, J.D.

Toby Hunter, founder and principal of Prestige Capital Advisers, LLC (Prestige), has consented to the imposition of injunctive and equitable relief in settlement of an action brought against him by the CFTC. The district court issued a permanent injunction against Hunter after concluding that he was likely to commit similar future violations in connection with futures contracts and commodity option transactions. Hunter was also ordered to pay restitution and a civil monetary penalty (CFTC v. Prestige Capital Advisors, LLC, June 13, 2013, Cogburn, M.).

Prestige. Hunter operated both Prestige, a commodity pool operator, and D2W Capital Management (D2W), a provider of managed account services. According to the Commission, in 2010 Hunter solicited at least $4.65 million from investors in connection with pooled investments in, among other things, commodity futures, index options, and spot currencies. Investors were told that all funds invested in the pool would be held in the fund's name and not commingled.

The pool participants' funds, however, were deposited in trading accounts at various financial institutions and nearly $1.5 million was subsequently lost in trading. Some of the funds were returned to participants and some remain frozen in a brokerage account. Over $2 million was misappropriated by Prestige and transferred to accounts owned or controlled by Prestige. Pool participants were referred to a website for information on returns, but the information posted on the site was false. Prestige also issued false account statements to pool participants.

D2W. D2W was established by Hunter in 2008 to trade forex contracts on behalf of clients in exchange for commissions. Prospective clients were referred to the same website as Prestige's clients for information about D2W's performance; this information was similarly false, and Hunter had no data to support the purported returns.

D2W had 17 clients, one of whom provided $100,000, which was placed by Hunter into a brokerage account held in D2W's name. Prestige's website showed this client's account as having a balance of $94,000 when that actual trading records showed a balance of $14,750. Trading in this client's account resulted in net losses of $85,250; the remaining $14,750 was returned to the client.

Violations. The court held that Hunter's conduct with Prestige violated Sections 4b(a)(l)(A)-(C), 4c(b) and 4o(1) of the Commodity Futures Act and Regulations 4.20, 4.30 and 33.10. His conduct with D2W resulted in violations of Section 4b(a)(2)(B). He was also liable as a controlling person for the violations of both entities.

Hunter was permanently enjoined from fraud in connection with commodities, options or forex contracts and from receiving funds in the name of a commodity pool and commingling those funds. He was also barred from participating in transactions involving commodity futures, options on commodity futures, commodity options, swaps, security futures products, and forex contracts. He was additionally barred from registration and from acting as a principal or officer.

Hunter was ordered to pay restitution of $40,000 for his violations in connection with the operation of Prestige and restitution of $85,250 in connection with the operation of D2W. He was also ordered to pay a civil penalty of $280,000 plus post-judgment interest.

Earlier this year, Prestige was ordered to pay civil monetary penalties of nearly $7 million, representing three times its monetary gain from its violations. D2W was ordered to pay $280,000. In a subsequent order in February, Prestige was ordered to pay restitution of over $4.1 million and D2W to pay $85,250.

Case No. 3:11CV431-MOC-DCK

Attorneys: Eugenia Vroustouris for the U.S. Commodity Futures Trading Commission. Toby D. Hunter, Pro Se.

Companies: Prestige Capital Advisors, LLC, D2W Capital Management, LLC

MainStory: TopStory Enforcement FraudManipulation CommodityFutures NorthCarolinaNews

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